International Telecommunication Union
Standardization Bureau
Place des Nations
CH-1211 Geneva 20
Switzerland
www.itu.int
ISBN: 978-92-61-14921-5
9 789261 149215
Price: 50 CHF
Printed in Switzerland
Geneva, 2014
Understanding patents,
competition & standardization
in an interconnected world
© ITU 2014
All rights reserved. No part of this publication may be reproduced, by any means whatsoever,
without the prior written permission of ITU.
Understanding patents,
competition and standardization
in an interconnected world
Telecommunication Standardization Bureau
Acknowledgements
This publication is owing to the collaborative spirit of several intellectual property, competition and
standardization experts. For their generous contribution of time and expertise, ITU is thankful to the
following principal authors, in alphabetical order: Rudi Bekkers, Matthew Dalais, Antoine Dore and
Nikolaos Volanis.
For their constructive input, contributions and reviews of the manuscript and their willingness to
engage with this project in their personal capacities, ITU is thankful to the following contributors, in
alphabetical order: Jennifer Bush, Dave Djavaherian, Guillaume Dufey, Martha Parra de Friedli, Michel
Goudelis, Ignacio de Castro Llamas, Amy Marasco, Tomoko Miyamoto, Gil Ohana, Gerard Owens,
Serge Raes, Rafael Ferraz Vazquez, Heike Wollgast and Michele Woods.
The opinions expressed in this publication are those of the principal authors and do not necessarily
represent the views of the ITU. Nothing in this publication is to be considered as an authoritative
interpretation of the ITU-T/ITU-R/ISO/IEC Common Patent Policy and related Guidelines as this
publication is only intended for educational and informational purposes.
Foreword
3
Foreword
The intention of this publication is to provide government officials, private-sector executives and
industry analysts of all disciplines with an overview of the current state of play in the interrelationship
of intellectual property and standardization in the information and communication technology (ICT)
sphere. It provides a high-level introduction to standardization and intellectual property systems and
the various means with which ICT standards bodies manage their intersection. Building on these
fundamental concepts, the publication explores recent years’ uptick in litigation involving standardessential patents to provide readers with the basis necessary to engage with ITU’s ongoing evaluation
of possible reform to the ITU-T/ITU-R/ISO/IEC Patent Policy and related Guidelines.
Intellectual property rights (IPR) and technical standards are essential ingredients in driving market
growth, mutually beneficial trade and economic development. And while the two systems seem at
cross-purposes – intellectual property consolidating innovation’s financial returns in the hands of
inventors; standards publishing specifications designed for global adoption – both play complementary
roles in providing a basis for iterative innovation and technological advance.
The ICT industry relies on intellectual property and standardization to an extent rivalled by few other
industry sectors. The history of communications is one characterized by inventive step after inventive
step, leading players in the ICT sector to amass an unparalleled volume of intellectual property. Technical
standardization establishes engineering norms for technical systems and is crucial in capturing and
further stimulating innovation, providing the lifeblood to ICT networks in need of common protocols or
‘languages’ to enable compatibility and interoperability.
Technical standards seek to reflect the state of the art and may include patented technologies by virtue
of their drawing on the best available technologies to formulate specifications that ensure groundbreaking innovations can be shared across the world.
Managing the incorporation of patented technology in ICT standards demands a precise balance of the
interests of IPR holders and standards implementers. IPR holders need an assurance of reasonable
compensation for the adoption of their IPR-protected innovations to motivate their contribution of such
innovations to standards development processes. Potential standards implementers similarly require
the security of a reasonable IPR licensing fee to motivate their conformance with standards.
ITU’s Telecommunication Standardization Sector (ITU-T) has garnered many years of experience with
the complexities of patents’ inclusion in standards through its longstanding commitment to the
consensus-driven development of ‘open standards’. In 2007, based on best practices determined
by ITU-T Study Groups, a common ITU-T/ITU-R/ISO/IEC Patent Policy and related Guidelines were
established as a unified governing framework for the three international standards bodies’ approach
to ‘standard-essential patents’ (SEPs).
Malcolm Johnson
Director of the ITU Telecommunication
Standardization Bureau
Understanding patents, competition and standardization in an interconnected world
4
Table of Cotents
Table of Contents
Acknowledgements.............................................................................................................2
Foreword..............................................................................................................................3
Introduction.........................................................................................................................8
Part I – Standards and standards development..................................................11
1.
A brief history of standardization...........................................................................13
2.
The types of standards and their increasing importance.....................................14
3.
Standards development and standards-setting entities .....................................17
3.1 General overview..............................................................................................17
3.2 Standards developed by single companies.....................................................17
3.3 Standards developed by formal standards-developing
organizations (SDOs)........................................................................................19
3.4 Standards developed by forums and consortia or quasi-formal SDOs...........20
3.5 Core principles governing formal standardization processes..........................21
4.
The advantages and disadvantages of technical standards.................................25
4.1 General overview..............................................................................................25
4.2 Potential advantages of standards...................................................................26
Encourage innovation and competition.......................................................26
Facilitate interoperability..............................................................................26
Increase cost efficiency...............................................................................26
Promote national development...................................................................27
4.3 Potential disadvantages of standards .............................................................28
Transfer of power to standardization participants.......................................28
Market protection and obstruction of market access.................................28
Reluctance to adopt new or improved standards.......................................28
Loss of variety..............................................................................................29
Part II – General concepts of patent law and competition law.........................31
5.
General concepts of patent law..............................................................................33
5.1 Objectives and scope of patent law................................................................33
Understanding patents, competition and standardization in an interconnected world
Table of Cotents
5
5.2 Four challenges of the patent system affecting the standardization
ecosystem........................................................................................................34
Proliferation of patents and the effects on backlog and uncertainty..........34
Quality of patent searches and examinations.............................................36
Patent thickets.............................................................................................36
Non-practising entities and patent trolls.....................................................37
5.3 Other forms of intellectual property rights relevant to standardization...........38
Characteristics of copyright.........................................................................38
Characteristics of trademarks .....................................................................38
6.
General concepts of competition law.....................................................................39
6.1 Objectives and scope of competition law ......................................................39
Prohibiting agreements, collaborations or practices between market
players which may restrict free trading or competition between
businesses...................................................................................................40
Prohibiting abusive conduct by a dominant market player.........................41
Monitoring market concentration and mergers..........................................41
6.2 Competition law in a standards-setting context..............................................42
7.
Interplay between patent law and competition law.............................................44
7.1 General treatment of patents under competition law.....................................44
7.2 Anti-competitive conduct involving standard-essential patents......................46
Part III – The interplay between patents and standards....................................49
8.
The challenging relationship between patents and standards............................51
9.
The role of SDOs and their IPR policies..................................................................55
9.1 General overview..............................................................................................55
9.2 Principal types of IPR policies..........................................................................57
Participation-based IPR policies..................................................................57
Commitment-based IPR policies.................................................................58
9.3 The basic building blocks of commitment-based IPR policies........................58
Disclosure rules...........................................................................................58
Seeking licensing commitments.................................................................59
10. The growing tension between patents and standards ........................................60
Understanding patents, competition and standardization in an interconnected world
6
Table of Cotents
11. Specific concerns and issues with patents in standards......................................64
11.1 The meaning of ‘reasonable’............................................................................65
Separating the value of the patented technology from the value of
standardization itself....................................................................................65
Royalty stacking and aggregate reasonable royalties.................................66
Royalty base.................................................................................................67
11.2 The meaning of ‘non-discriminatory’...............................................................68
11.3 Availability of injunctive relief for SEPs............................................................69
11.4 Transfer of ownership of SEPs.........................................................................70
11.5 Demands for reciprocity and/or cross-licensing with SEPs.............................70
11.6 SEPs and patent-assertion entities...................................................................71
12. Overview of governments and courts’ perspectives on SEPs..............................72
12.1 Governments’ perspectives.............................................................................72
12.2 Courts’ perspectives.........................................................................................72
12.3 The promise of alternative dispute resolution.................................................74
Part IV – A closer look at ITU’s standardization activities and its patent
policy..............................................................................................................77
13. ITU and its role in international standards development.....................................79
14. ITU-T standardization process ...............................................................................81
15. ITU-T/ITU-R/ISO/IEC Common Patent Policy and related Guidelines ...............83
15.1 History and evolution ......................................................................................83
15.2 Scope and key concepts .................................................................................83
15.3 Disclosure of SEPs ..........................................................................................84
To whom does the disclosure rule pertain?................................................85
Disclosure of another party’s patents.........................................................86
At what point in time should disclosure occur?..........................................86
Disclosure after approval of a standard......................................................86
How disclosures are made .........................................................................86
15.4 Licensing commitments for declared SEPs ....................................................88
Commitment to license on royalty free (RF) terms ....................................89
Commitment to license on RAND terms ....................................................89
No willingness to license ............................................................................89
Understanding patents, competition and standardization in an interconnected world
Table of Cotents
7
A patent holder may not modify the Declaration Form...............................90
A patent holder may submit multiple Declaration Forms...........................90
A Declaration Form, once submitted, is irrevocable...................................90
The General Patent Statement and Licensing Declaration Form................90
Transfers and assignment of declared SEPs...............................................91
ITU’s Patent Information database..............................................................91
Conduct at meetings...................................................................................92
ITU will not interfere with negotiations nor settle disputes........................92
15.5 Recent steps aimed at improving the Common Patent Policy .......................92
Questions for consideration.............................................................................................93
Figures
Figure 5-1 – Number of patent applications received and patents granted by
the US Patent and Trademark Office, 1790-2010 .............................................................35
Figure 5-2 – Annual number of patents granted by
the world’s five largest patent offices ...............................................................................35
Figure 8-1 – Disclosed SEPs by technology class .............................................................52
Figure 10-1 – Growth of SEP declarations over time..........................................................61
Figure 10-2 – The probability of SEP-related litigation compared with
that related to non-standard-essential patents (‘baseline’)................................................62
Figure 14-1 – New and revised ITU-T Recommendations approved, 2000-2013...............82
Figure 15-1 – Number of patent declaration statements by regional origin, 2000‑2013 ...85
Figure 15-2 – Text from the Patent Statement and Licensing Declaration Form,
in which a submitter selects licensing options..................................................................87
Figure 15-3 – Type of received licensing commitments, by year ......................................88
Tables
Table 3-1 – Different standards-setting entities and their resulting standards..................17
Table 3-2 – Examples of international SDOs and consortia and their standards of
relevance to ICTs.................................................................................................................23
Table 4-1 – Overview of possible advantages and disadvantages of standards ...............25
Table 8-1 – The 24 standards that have 100 or more patent statements...........................53
Table 9-1 – Licensing or non-assertion modes explicitly specified by the policy...............57
Table 13-1 – Overview of current ITU-T study groups.........................................................79
Understanding patents, competition and standardization in an interconnected world
8
Introduction
Introduction
Standards have existed for thousands of years. Standards for the measurement of time, distance and
weight were among the first types of standards created, but as humankind has advanced, so has
standardization.
In the last century, ITU standards enabled international direct dialling of telephones and the sending of
faxes. In today’s high-tech world, standards have increased dramatically in prevalence and complexity,
as well as in their importance to government, industry and consumers. Standards today underpin
interconnection, interoperability and the exchange of data such as images and video; they are critical
to the functionality of computers, tablets, phones and other ubiquitous information and communication
technologies (ICTs).
The early years of the World Wide Web saw the proliferation of a variety of largely proprietary video and
interactive formats, but today nearly all devices using the Web rely on standards such as HTML 5 and
Rec. ITU-T H.264. International standardization has ensured that modern mobile phones, tablets and
other devices are able to create and view interactive Web content using telephone and data networks
almost anywhere in the world.
For many years, people were more than satisfied with being able to pick up a telephone and have an
operator connect them to their friends and family across town. Innovation led to operators’ later ability
to connect callers over greater distances, often across regional and national borders. Subsequent
innovations – in the form of standardized numbering plans and advancements in switching and other
technologies – eliminated the need for most operators, enabling telephone operating companies
to empower callers to connect themselves. These innovations were driven by both consumers and
telephone operating companies, the former seeking greater privacy and convenience, the latter aiming
to reduce their costs and improve performance.
This is a common pattern. The advent of ground-breaking innovation or technological advance is, over
time, followed by standardization that improves related technologies’ interoperability and functionality,
freeing creative technologists and implementers to dream of better, faster, more convenient ways to
fulfil the needs served by earlier innovation.
As the world becomes more connected, it is becoming even more important to bring innovators
together to develop standards that reflect innovation and spur successive steps forward. Standards
bodies such as ITU are a primary means of enabling the collaboration and cooperation that leads
to the establishment of international standards. Standards bodies adhere to rules and procedures
that promote openness and transparency, thereby providing an environment where innovators from
competing companies can come together to develop and agree on technical standards in the public
interest. Negotiations and decisions on the technical characteristics of a soon-to-be standardized
technology are resolved during the development of the requisite standards, early in the technology’s
lifecycle, seeking to minimize the possibility that producers and consumers will invest in technologies
later made obsolete by the emergence of a superior solution.
Competitors’ collaboration and cooperation in the development of standards create efficiencies
enjoyed by all market players. Internationally agreed standards lower the costs to start a company or
develop a product. They enable new firms to enter a market, increasing competition and incentivizing
competitors to innovate both in differentiating their products and streamlining their production
methods. Interoperability improves as greater numbers of standards-based products enter the market,
Understanding patents, competition and standardization in an interconnected world
Introduction
9
which in turn encourages the adoption of standards by other market players. This continuous process
in markets for standards-based products results in lower costs to producers and lower prices to
consumers. Through iterative refinement, future innovations accommodate prior technologies and,
in parallel, the new standards developed in line with such advances will often accommodate prior
standards to ensure the backward compatibility of standards-based products. As technology marches
on, the need for interoperability continues unabated.
There are many considerations relevant to the choice of the specific technologies to be included in
a standard. It is important to remember that standardization is not always about adopting the ‘best’
innovation. Standardization brings together diverse, competing interests to develop and agree on
standards with the potential to benefit all market players. Participants in a standard’s development
might favour different technologies and the standard agreed to provide the long-term foundation of a
market will often be a compromise of technologies rather than one in isolation.
This cycle – innovate, standardize, innovate, standardize, innovate, standardize – is continuous.
Almost all the governments of the world recognize the need to protect creativity and invention through
intellectual property protection regimes. Whether patents, trademarks or copyright, IPR acknowledge
and reward innovation while encouraging the advancement of the useful arts for all of society.
Intellectual property, like innovation, plays a key role in standardization. IPR regimes protect inventors’
exclusive rights to practise their inventions for a limited period of time. However, seemingly in
opposition to IPR regimes, the goal of standardization is to encourage widespread practise of inventions
codified by standards. Standards bodies address this tension through their IPR or patent policies. The
patent policies of ITU and most other standards bodies allow the inclusion of patented technology in
standards only if patent holders disclose the presence of patented technology in a draft standard and
make commitments to licensing the relevant IPR to standards implementers on Reasonable and Nondiscriminatory (RAND) terms. In exchange for RAND commitments, such patent holders enjoy, among
other things, RAND royalty streams from standards implementers as well as potential time-to-market
advantages born of their advance knowledge of the best-practice implementation of their standardized
inventions.
The broad, non-discriminatory licensing of standard-essential patents (SEPs) is a means to spread the
benefits of inventions as quickly and widely as possible. As more standards implementers practise the
patented technology, these implementers discover new sources of improvement and develop additional
inventions. Standards implementers adopting patented technology as part of their conformance to
standards can improve standard-essential inventions to the extent that they become the origin of
inventions essential to successive standards, themselves possibly becoming the recipients of new
RAND licensing revenue streams.
In some standards, the presence of a large number of SEPs will favour the formation of a ‘patent pool’.
These patent pools aggregate a standard’s SEPs with a view to enabling faster, simpler SEP licensing
arrangements, often on preferable monetary terms.
This cycle – innovate, patent, standardize, license, innovate – makes it clear that a synergy exists among
standards, innovation, and intellectual property. This cycle is not immune to abuse. Opportunities
Understanding patents, competition and standardization in an interconnected world
10
Introduction
remain for some to upset the cycle in favour of their own interests; however, when properly managed,
this cycle of technological progress benefits us all.
–– Innovators benefit from the opportunity to license their SEPs to standards implementers and receive
RAND compensation in return. Alternatively, they may see value in having their SEPs included in
standards in terms of their related product strategy (including time-to-market and other possible
advantages).
–– Standards implementers benefit from the ability to enter a market using the SEP-protected technology,
as well as the subsequent ability to use that technology as a basis for further or complementary
innovation.
–– Consumers benefit from greater choice, more affordable products, and the higher quality incentivized
by strong market competition. IPR regimes work to protect the incentive to innovate. Markets rely
on standards to maintain interoperability as innovation progresses the state of the art, and standards
also provide a common basis for the iterative innovation that extends the knowledge frontier.
Carefully developed patent policies, alongside well-crafted and enforced competition law, can help
balance the sometimes divergent interests of innovators, patent holders, standards implementers,
proprietary technology add-on developers, and consumers.
Understanding patents, competition and standardization in an interconnected world
Part I – Standards and standards development
11
Part I – Standards and standards development
1.
A brief history of standardization...........................................................................13
2.
The types of standards and their increasing importance.....................................14
3.
Standards development and standards-setting entities .....................................17
3.1 General overview..............................................................................................17
3.2 Standards developed by single companies.....................................................17
3.3 Standards developed by formal standards-developing
organizations (SDOs)........................................................................................19
3.4 Standards developed by forums and consortia or quasi-formal SDOs...........20
3.5 Core principles governing formal standardization processes..........................21
4.
The advantages and disadvantages of technical standards.................................25
4.1 General overview..............................................................................................25
4.2 Possible advantages of standards...................................................................26
Encourage innovation and competition.......................................................26
Facilitate interoperability..............................................................................26
Increase cost efficiency...............................................................................26
Promote national development...................................................................27
4.3 Possible disadvantages of standards ..............................................................28
Transfer of power to standardization participants.......................................28
Market protection and obstruction of market access.................................28
Reluctance to adopt new or improved standards.......................................28
Loss of variety..............................................................................................29
Understanding patents, competition and standardization in an interconnected world
12
Part I – Standards and standards development
Introduction and objectives of Part I
Social interaction relies on common respect for basic sets of norms, concepts or meanings – in
other words, standards.
Standards vary widely, having been established to serve a wide range of purposes, and they
are at play in almost every product we consume and every process that readies products for
consumption.
‘Technical standards’ are those that establish norms and requirements for technical systems,
specifying standard engineering criteria, methodologies or processes. The functionality of
systems incorporating communicating parts is especially dependent on conformance with
common standards, and here we often speak of ‘compatibility standards’ or ‘interoperability
standards’.
In our increasingly digital society, technical standards targeting compatibility and interoperability
are growing in importance, justifiably attracting the attention of policy-makers in their task of
creating regulatory conditions able to stimulate socio-economic development. Traditionally
most prevalent in the fields of information and communication technology (ICT) and consumer
electronics, technical standards are finding new relevance in supporting the roll-out of ICTenabled services in areas such as healthcare, transportation and energy.
Technical standards today fall into different categories, depending on the ‘entities’ responsible for
their development, their mandatory or voluntary nature, and the degree of ‘openness’ regarding
participation in a standards-development process and the ability to access and implement
resulting standards.
The ICT standardization landscape is a complex one, characterized by numerous standards
and standards-setting entities, some very focused and others very broad in scope. Standards
are developed by single companies or groups of companies, formal standards-developing
organizations (SDOs), and forums and consortia (quasi-formal SDOs).
Advantages of technical standards include their ability to encourage competition and innovation,
facilitate interoperability, improve cost efficiency and promote national development. Potential
disadvantages or ‘side-effects’ of technical standardization stem from the risk that power is
transferred to standardization participants, that standards are used to protect markets and
obstruct market access, and that successful standards lead to a loss of variety or a reluctance to
adopt new or improved standards.
Upon completion of Part I, the reader should have a good understanding of:
–– The purpose and impact of standardization in the ICT industry and global economy;
–– The general taxonomy of standards and standards-setting entities;
–– The general principles governing standardization processes; and
–– The possible advantages and disadvantages of technical standardization.
Understanding patents, competition and standardization in an interconnected world
Part I – Standards and standards development
1.
13
A brief history of standardization
Standards in their many forms play a fundamental role in connecting members of society with reliable
modes of communication, codes of practice and trusted frameworks for cooperation. Introducing
common interpretations on reciprocal sides of a communication or transaction, standards are integral
to mutually beneficial trade and resource-efficient international commerce.
Social interaction relies on common respect for basic sets of norms, concepts or meanings – intuitive
examples being language, weights and measures. Different communities, rich in different skills and
means of production, will find mutual benefit in trade and the larger marketplace it creates; but this
can only be achieved with a common language as a basis of communication or through smaller
communities’ learning the languages of their most important trading partners. A common system
of weights and measures is equally important, enabling trade by establishing an agreed method of
calculating volumes and corresponding values.
The roots of standardization lie in Egypt, China and Mesopotamia. Ancient Egypt, for instance, is said
to have applied an early form of standard weights and measures in uniformly shaped cylindrical stones
and it likely also had standards for building activities, including the construction of pyramids.1 Work
across the world to develop a calendar is one of best-known and earliest examples of science-based
standardization.2 The 15th century republic of Venice was not only the cradle of the modern patent
system, but also a pioneer in technical standardization, where standards played an important role in
producing interchangeable elements of warships.
The time of the French Revolution is considered the origin of conference-based standardization as we
know it today, pioneering large-scale setting of standards and norms in the interests of a larger, more
competitive common market.3
Standards enlarged the marketplace by unleashing trade, innovation and development on a scale
that was impossible in a feudal system in which transporting goods across different regions was
made inefficient by the variety of tariffs and taxes levied by landowners. Standardization is thus widely
credited as an integral component of the West’s modernization and industrial­ization over the 18th and
19th centuries. Especially intriguing was the development of the metre, which replaced not only a wide
variety of different measures of length but also many standards that combined length, quality and
other dimensions.4
While many of the above standards were developed or commissioned by governments or regulators,
as from the late 18th century industry became more invested in standardization and took a leading role.
The steam engine fuelled rapid industrialization by enabling the mass movement of goods and people
that ushered in unprecedented levels of urbanization and trade. This symbol of the Industrial Revolution
also supplied an early example of technical standardization, insofar as the impact of this innovation
1
2
Hesser, W. (ed.) (2012) Standardisation in Companies and Markets, 3rd edition, Hamburg: Pro Norm.
Richards, E.G. (1999) Mapping Time: The Calendar and its History, Oxford: Oxford University Press, [Online], Available:
ftp://antares.as.itb.ac.id/pub/ebooks/astronomy/ebooksclub.org__Mapping_Time___The_Calendar.pdf
3
Wenzlhuemer, R. (2010) The History of Standardisation in Europe, [Online], Available: http://ieg-ego.eu/en/threads/transnationalmovements-and-organisations/internationalism/roland-wenzlhuemer-the-history-of-standardisation-in-europe
4
Alder, K. (2002) The Measure of All Things: The Seven-Year Odyssey and Hidden Error That Transformed the World. New York: Free
Press.
Understanding patents, competition and standardization in an interconnected world
14
Part I – Standards and standards development
hinged on the widespread adoption of a standardized railway gauge, quickly discovered to be essential
in allowing trains to travel seamlessly between various railway networks.
Midway through the 19th century, standardization became a key element of industrial production
in the United States (US), a famous example being provided by Eli Whitney’s manufacture of arms
for the military, whereby standardized gun parts were made interchangeable and so separated the
production of guns from that of bullets. Also midway through the 19th century, the adoption of the
electric telegraph gave rise to the world’s first international technical standard and, as a result of the
International Telegraph Convention of 1865, the first truly intergovernmental organization in the form of
the International Telegraph Union, the prede­cessor to today’s International Telecommunication Union
(ITU).
2.
The types of standards and their increasing importance
How many interoperability
standards in a laptop?
A recent empirical study identified 251
technical interoperability standards in a
modern laptop computer, and estimated
that the total number of standards
relevant to such a device is much higher.
Biddle, B., White, A., & Woods, S., How Many
Standards in a Laptop? (And Other Empirical
Questions). Proceedings of the 2010 ITU-T
Kaleidoscope Academic Conference, Pune, India,
13-15 December 2010
A standard can be defined as a document which
provides requirements, specifications, guidelines or
characteristics that can be used consistently to ensure
that materials, products, processes and services are
fit for their purpose.5 Today, standards are at play in
almost every product we consume and every process
that readies products for consumption. Standards are
applied to increase the efficiency of individual processes
and to introduce common systems across divisions of
individual companies. They establish commonalities
across companies in an industry, industries in a country
and countries in a region, and across regions in today’s
global economy.
Despite fulfilling the above definition, standards vary
widely, having been established to serve a wide range of purposes. While many taxonomies of standards
are used, the following overview summarizes some of the most important types of standards:
–– Vocabulary standards cover glossaries and definitions of terms, and these standards provide
uniformity and cohesion in the interpretation of terms used in various other standards. Among
many other areas, vocabulary standards are important in health and medical information to prevent
misunderstandings and mismatched interpretations among medical practitioners.6
–– Measurement standards, as their name suggests, address definitions of measure. With the exception
of a few seemingly fundamental physical constants, units of measurement are essentially arbitrary;
in other words, people make them up and then agree to use them. This category includes basic
standards, which detail seven basic units of the International System of Units: length as metre (m),
mass as kilogram (kg), time as second (s), electric current as ampere (A), temperature as Kelvin (K),
substance as mole (mol) and luminous intensity as candela (cd).
5
International Organization for Standardization (ISO), What is a standard?, [Online], Available: http://www.iso.org/iso/home/standards.
htm
6
See, for example, the International Non-proprietary Names (INN) Programme maintained by the World Health Organisation
(WHO), whereby WHO collaborates closely with INN experts and national nomenclature committees to select a single name
of worldwide acceptability for each active substance that is to be marketed as a pharmaceutical. For more information, see
http://www.who.int/medicines/services/inn/en/
Understanding patents, competition and standardization in an interconnected world
Part I – Standards and standards development
15
–– Safety standards are standards designed to ensure the safety of products, activities or processes.
They may be voluntary or mandatory and are normally established by an advisory or regulatory body.
–– Management standards cover a diverse range of standards and techniques including inventory
management, production manage­ment, banking transaction documentation, information technology,
logistics, quality management systems and environmental management systems.
–– Product standards are the most common type of standard. They contain specifications that cover
the requirements for a material or product, providing comprehensive guidance for producing,
processing, selling, purchasing and using the product. Product standards may include requirements
for dimensions, performance, packaging, labelling, methods of sampling and test methods.
–– Technical standards generally refer to the establishment of norms and requirements for technical
systems, specifying standard engineering criteria, methodologies or processes. The functionality of
systems incorporating communicating parts is espe­cially dependent on conformance with common
standards. Here, we often speak of ‘compatibility standards’, also known as ‘interoperability
standards’. These standards specify how technologies such as a mobile phone and a mobile
network, or a compact disc and a compact disc player, interact with one another and work together
successfully. Compatibility and interoperability standards are most common in the ICT and consumer
electronics sectors, but their importance to other industry sectors is growing rapidly.
The value of standards is well understood, both from an economic and a policy perspective. More
than ever before, with European integration a case in point, standards are being recognized as crucial
to expanding common markets and sustaining socio-economic development. This is reflected in
the attention that policy-makers are devoting to technical standardization. The European Union has
emphasized standards and interoperability as ‘Pillar II’ of the Digital Agenda for Europe,7 and the US
has included standardization as a key component of its Strategy for American Innovation: Securing Our
Economic Growth and Prosperity.8 Other countries are attributing similar weight to standardization;
this is especially true of China, a country of increasing prominence in the standardization world.9
There are several reasons behind policy-makers’ growing focus on standardization.
In our increasingly digital world, the global economy is becoming more dependent on technical standards
to enable interoperability and compatibility.10 Today, it is hard to imagine how telecommunication
services would function without the standards that underlie mobile terminals’ interaction with
telecommunication networks, or how a TV or video-streaming service would operate without the
television receiver implementing the same standard as the broadcaster or creator of the audiovisual
material. Consumer electronics are equally dependent on standards, with an example in MP3 audio
coding.
Computers also rely on a wide range of standards to perform the functions expected of them. And while
not all standards employed in computers, or in game consoles for that matter, are ‘open standards’,
7
European Commission (EC) Pillar II of the Digital Agenda for Europe, [Online], Available: http://ec.europa.eu/digital-agenda/en/ourgoals/pillar-ii-interoperability-standards
8
Executive Office of the President (2012) Memorandum for the heads of executive departments and agencies, Issued 17 January
2012, [Online], Available: http://www.whitehouse.gov/sites/default/files/omb/memoranda/2012/m-12-08.pdf
9
Breznitz, D. and Murphree, M. (2011) ‘Standardized Confusion? The Political Logic of China’s Technology Standards Policy’, Social
Science Research Network (SSRN), [Online], Available: http://ssrn.com/abstract=1767082
10
See, for example, ISO Studies on benefits of standards, [Online], Available: http://www.iso.org/iso/home/standards/
benefitsofstandards/benefits_repository.htm?type=EBS-MS; United Nations Industrial Development Organization (UNIDO) (2006)
‘Role of Standards: A guide for small and medium-sized enterprises’, Working Paper, [Online], Available: http://www.unido.org/
fileadmin/media/documents/pdf/tcb_role_standards.pdf
Understanding patents, competition and standardization in an interconnected world
16
Part I – Standards and standards development
these standards are nonetheless crucial in ensuring that these products can operate successfully and
interact with their environment.
A second reason for policy-makers’ increased interest in standardization is that standards are fast
becoming essential to industry sectors outside the domains of ICT and consumer electronics. New
demand for compatibility and interoperability standards is being driven by innovations of key value
in responding to fundamental socio-economic challenges, such as smart grid, e-health, intelligent
transport systems (ITS), mobile money and smart metering technologies for water, gas and electricity
management.
Nearly every industry sector introducing ‘smart’ systems is expected to rely heavily on compatibility
standards.11 The use of ICTs as ‘enabling technologies’ will demand ICT standards that are either purposebuilt or adapted to the requirements of markets not traditionally involved in the ICT standardization
process.
One example is the European eCall road safety programme, where each new car will be capable of
initiating an automatic call for emergency services in the event of an accident. This programme relies
on existing telecommunication standards, augmented to serve this new application.12
Some smart systems will call for new compatibility standards developed to fit the purposes of new
fields not yet part of existing technology areas. Standardization to drive the growth of e-health systems
is one illustration of this type of targeted standards devel­op­ment.
Regardless of the nature of standards to serve these new applications – applications of great importance
to our future as a society – standardization will be pivotal in realizing their potential, and political
attention to standardization is set to grow further in response.
Many standards — many standards-setting entities
Modern communications services, and associated devices and equipment, seldom rely on one single
standard to satisfy end users’ needs. They often depend on dozens if not hundreds of different
standards, some of which address very specific technical aspects while others specify broader solutions
or systems. These standards often originate from a wide array of standards-setting entities.
Take for example your smartphone. ITU’s standardization arm (ITU-T) develops the ‘codecs’ that
provide voice and video, also enabling mobile backhaul with optical transport standards. ITU’s
radiocommunication arm (ITU-R) manages the radio-frequency spectrum in which it operates. The
Third Generation Partnership Project (3GPP) develops standards for the radiocommunications between
smartphone and network. The Institute of Electrical and Electronics Engineers (IEEE) develops ‘Wi-Fi’
standards.* The Internet Engineering Task Force (IETF) maintains the Internet Protocol suite (TCP/IP) and
Hypertext Transfer Protocol (HTTP). The World Wide Web Consortium (W3C) is responsible for Hypertext
Markup Language (HTML) and Extensible Markup Language (XML), and this is just a sample of the many
standards bodies and standards involved.
* Formally, this is called the IEEE 802.11 series of standards. The popular ‘Wi-Fi’ term was introduced by the Wi-Fi Alliance, an
organization that performs interoperability certification and related standardization activities.
11
Gungor, V.C., Sahin, D., Koçak, T., Ergüt, S., Buccella, C. Cecati, C. and Hancke, G.P. (2011) ‘Smart Grid Communication Technologies
and Standards’, IEEE Transactions on Industrial Informatics, vol. 7, no. 4, November, pp. 529-539.
12
EC eCall: Time saved = lives saved, [Online], Available: http://ec.europa.eu/digital-agenda/ecall-time-saved-lives-saved
Understanding patents, competition and standardization in an interconnected world
Part I – Standards and standards development
3.
Standards development and standards-setting entities
3.1
General overview
17
There are three broad categories of standards-setting entities: single companies, formal SDOs and
forums or consortia. The type of entity responsible for a standard usually has implications for the status
of that standard, particularly regarding its degree of ‘openness’ (see section 3.5). Table 3-1 provides a
general overview of the different types of standards-setting entities and the nature of their standards.
Table 3-1 – Different standards-setting entities and their resulting standards
Standards-setting
entity
Produces
Examples
Single companies
‘Proprietary specifications’.
Standards that evolve from a specific
company or vendor.
Formal standardsdeveloping
organizations (SDOs)
‘Open standards’13 (which can become ‘de
jure standards’ if their implementation is
mandated by law).
ITU, ISO, IEC, ETSI, various national
standards bodies, etc.
Forums and consortia
(quasi-formal SDOs)
Typically, open standards, but may produce
closed standards, depending on the
organization in question.
IETF, Broadband Forum, W3C, Bluetooth
consortium, OASIS, etc.
3.2
Standards developed by single companies13
Standards developed by a single company are also known as ‘proprietary specifications’. The firm
retains full control over the specifi­cations and their future evolution, typically not allowing others
to participate, or setting the rules by which others can participate but keeping the final say. Such
specifications, to their developers, have the benefit that they can be developed, published and taken
to market faster than their conference-based counterparts (which allow input from many competing
interests), and they may be optimized to serve the specific interests of the firm developing them.
If a proprietary specification comes into widespread use (assuming the owner has allowed this to
happen by granting licences to intellectual property), it can translate into a strong source of revenue or
provide other benefits. It is important to note that these ‘proprietary specifications’ are not the same as
collaboratively-developed standards, and the owner of any related patents is not subject to the specific
licensing constraints (such as ‘RAND’, which will be discussed later).
Since standardization is essentially a voluntary activity, any company (or group of companies)14 can
develop its own specification or standard.
When these publicly available specifications or standards become very successful in terms of market
acceptance (or adoption), they may be referred to as ‘de facto standards’. Growth in popularity as
a measure of determining whether a technique or technology has become a de facto standard is a
13
The term ‘open standard’ is further discussed in section 3.5
14
If a group of companies develops a standard, it can also be considered a forum or consortium, as further discussed in section 4.1.3.
Understanding patents, competition and standardization in an interconnected world
18
Part I – Standards and standards development
significant element of informal standardization, as opposed to more formal standardization processes
whereby standards are approved or declared by designated entities.
The company that developed a specification will decide whether it wants to promote and facilitate
others’ adopting it or, alternatively, ‘keep the standard to itself’. A company will choose the first scenario
if it believes it stands to benefit from sharing the specification with others, because it wants to create
a wider, more attractive market and platform for all companies, itself included, or because it wants to
encourage the development of complementary devices, software, service or content.
A well-known example is the Video Home Standard (VHS) developed by the Japanese company,
JVC. JVC was convinced that it would benefit from actively promoting its standard, not only among
competing manufacturers of video deck players, but also among tape manufacturers and movie makers
able to provide the VHS platform with valuable content.
A company will choose to keep a specification to itself for many reasons, including if it believes it is well
positioned to serve the full market. Manufacturers of computer printers (laser printers, inkjet printers,
etc.) serve as an example. While they might try to discourage others from adopting their specifications
by not making the specifications available to the public, they can only legally prevent others from doing
so if they own the necessary intellectual property rights on their standards and decide not to license
those rights to others.
Additional examples of proprietary specifications:
–– Hewlett-Packard’s Printer Command Language (PCL) is a page description language originally
developed in 1984 for early inkjet printers, which later came into wide­spread use in thermal, matrix
and laser printers.
–– IBM’s Video Graphics Array (VGA), introduced in 1987, was an IBM-developed graphical standard that
the majority of IBM Personal Computer clone manufacturers conformed to, making it the common
denominator that almost all post-1990 PC graphics hardware can be expected to implement. Even
today it is close to indispensable in connecting a laptop computer to a projector.
If proprietary specifications become very widespread, it is not unusual for the original developer to
offer the specifications to a formal SDO, particularly in cases where specifications lend themselves to
international standardization15. If approved by an SDO, the specifications gain the status of a formal
standard and the SDO in question becomes responsible for the maintenance and further development
of the standard (as appropriate) – a model which provides specifications with a good platform for
greater dissemination and adoption. However, the company will in this case not retain its full and
exclusive control over the standard.
Examples of proprietary specifications later formalized by SDOs:
–– Portable Document Format (PDF), developed by Adobe Systems, is a file format used to represent
documents in a manner independent of application software, hardware and operating systems.
Adobe made the PDF specification available free of charge in 1993 but it remained a proprietary
format until 2008 when it was formalized as an international standard by the International Organization
for Standardization (ISO) as ISO 32000-1. By submitting PDF to ISO, Adobe made the standard more
attractive to governments, among others, which were seeking a universal open document format
for communications and archival purposes. In parallel, Adobe published a public patent licence to
15
It should be noted that companies also routinely offer industry specifications to consortia.
Understanding patents, competition and standardization in an interconnected world
Part I – Standards and standards development
19
ISO 32000-1, thereby granting royalty-free rights to all Adobe-owned patents necessary to make,
use, sell and distribute PDF-compliant implementations.
–– Synchronous Optical Networking (SONET) has been the dominant transport protocol within
telecommunication networks for the past 20 years. It can be thought of as a set of generic transport
containers to carry voice or data messages. These transport containers enable the delivery of a
variety of protocols, including traditional telephony, asynchronous transfer mode (ATM), Ethernet
and TCP/IP. The protocol was originally defined by Telcordia Technologies and later formalized by
ITU under the name Synchronous Digital Hierarchy (SDH), as Recommendations ITU-T G.707, ITU-T
G.783, ITU-T G.784 and ITU-T G.803.
3.3
Standards developed by formal standards-developing organizations
(SDOs)
Underlining the importance of an open, accessible standards-setting system, many national authorities
have established and/or formally recognized certain national or international standards bodies. Such
organizations are generally known as formal SDOs.16 National SDOs are usually membership-driven
bodies that bring together standardization experts – often from competing companies and from
governments, academia and civil society – to develop standards in response to priorities determined
by public- or private-sector members. Some regional or global SDOs permit direct participation from
private-sector entities by granting them membership, while others facilitate indirect private-sector
participation via national SDOs (usually “the national body most representative of standardization in
its country”).17 In the latter case, SDOs delegate to National Committees the role of representing the
interests of all national stakeholders, including entities in the private sector.
SDOs establish rules governing rights to participate in the standards-development process, consensusbased procedures for decision-making, the open availability of standards’ specifications,18 and often also
policies on patents’ interaction with standards. Standards
are finalized through an approval process conducted by
Fostering development through
the membership, the secretariat or a combination of the
international standards
two, most often through a consensus-based approach.
Important international SDOs are the International
Organization
for
Standardization
(ISO),
which
covers almost all technical areas; the International
Electrotechnical Commission (IEC), which focuses on
electrical, electronic and related technologies;19 and
the Inter­national Telecommunication Union (ITU), which
focuses on ICT.
ITU, ISO and IEC collaborate under the banner of the
World Standards Cooperation (WSC) to ensure the
efficient coordination of their international standardization
“
International standards bodies such as
ISO, IEC and ITU provide cohesion to a
myriad of national and regional standards,
thereby harmonizing global best practices,
eliminating technical barriers to trade
and fostering shared socio-economic
advance. ”
Message by Klaus Wucherer (President of IEC),
Terry Hill (President of ISO) and Hamadoun I. Touré
(Secretary-General of ITU), on the occasion of World
Standards Day 2013, India, 13-15 December 2010
16
Some literature instead uses the term standards-setting organization (SSO); but in the context of this publication, we will consider
both terms interchangeable.
17
ISO (2013) ISO Membership Manual, pp. 8, [Online], Available: http://www.iso.org/iso/iso_membership_manual_2013.pdf
18
Here, ‘open’ does not necessarily mean ‘free’. Many national standards organizations have a funding model based on selling their
standards.
19
ISO and IEC collaborate in ISO/IEC JTC1 (Joint Technical Committee 1), which focuses on ICT standardization.
Understanding patents, competition and standardization in an interconnected world
20
Part I – Standards and standards development
work. ITU also works to harmonize national and regional standards, and here the Global Standards
Collaboration (GSC) is the mechanism giving direction to the global coordination of standards
development by assembling key international, regional and national standards bodies in the telecom
and radiocommunication fields.20
As a result of direct recognition by the European Commission, Europe hosts three important regional
SDOs: the European Committee for Standardization (CEN), the European Committee for Electrotechnical
Standardization (CENELEC)21 and the European Telecommunications Standards Institute (ETSI). Similar
regional standards bodies are found elsewhere in the world, two examples being the Pacific Area
Standards Congress (PASC) and the African Regional Organization for Standardization (ARSO).
At the national level, most countries possess a government-recognized SDO. The largest such bodies
include the British Standards Institution (BSI), the Deutsches Institut für Normung (DIN) and the
Association Française de Normalisation (AFNOR). The American National Standards Institute (ANSI) is
another very important SDO. ANSI differs significantly from BSI, DIN and AFNOR in that it does not
itself develop standards, instead overseeing the development of US voluntary consensus standards
by standards bodies that it accredits. Meeting the necessary conditions, a standard developed by
an accredited organization will be recognized as an “American National Standard”. ANSI thereby
coordinates US-based standards-development activities and represents the country’s standardsrelated interests in certain regional or international standardization entities.
3.4
Standards developed by forums and consortia or quasi-formal SDOs
Forums, consortia and other informal industry associations (considered similar for the purposes of this
publication) are especially prevalent in the ICT industry. They are often established in the belief that
informal cooperation among a smaller group of like-minded organizations can more quickly achieve an
outcome satisfying all participants. Among other functions they carry out in the service of members’
common interests, sector-specific industry associ­ations respond to demands from member companies
to develop technical standards. As such, these organizations lie somewhere between single companies
that develop standards and formal SDOs. Some organizations are established specifically to develop
a single standard, while others are designed to have a long lifespan or serve a wider technology area.
There are a large number of active standardization consortia across the world, some national or
regional in scope, some global. The well-known live inventory of standards-setting entities maintained
by Andrew Updegrove22 currently includes over 800 organizations developing, promoting or supporting
ICT standards, of which the lion’s share can be characterized as consortia. CEN also publishes such a
list, albeit not as comprehensive as Updegrove’s.23
Consortia differ in their degree of exclusivity. Some are open to everyone interested in participating
in the standards-development process, satisfying many, if not all, of the ‘open standards’ criteria
20
GSC participants include ITU-T, ITU-R, the Alliance for Telecommunications Industry Solutions (ATIS), US; the Association of
Radio Industries and Businesses (ARIB), Japan; the China Communications Standards Association (CCSA); the European
Telecommunications Standards Institute (ETSI); the ICT Standards Advisory Council of Canada (ISACC); the Telecommunications
Industry Association (TIA), US; the Telecommunications Technology Association (TTA), Korea; and the Telecommunications
Technology Committee (TTC), Japan.
21
CEN and Cenelec are the European counterparts of ISO and IEC, respectively.
22
Updegrove, A., Standard Setting Organizations and Standards List, [Online], Available: http://www.consortiuminfo.org/links/
23
European Committee for Standardization (CEN) ICT Standards Consortia, [Online], Available: http://www.cen.eu/cen/Sectors/
Sectors/ISSS/Consortia/Pages/default.aspx
Understanding patents, competition and standardization in an interconnected world
Part I – Standards and standards development
21
mentioned in section 3.5 below. An example is the Organization for the Advancement of Structured
Information Standards (OASIS). Other types of consortia are more exclusive, restricting participation or
access to standards to invitees only, holding closed meetings or only accepting members who meet
certain criteria.
There are some very large, successful standards bodies that fall into the ‘consortium’ category. These
bodies are similar to formal SDOs in most respects other than not being formally recognized by national
authorities, and could hence be termed ‘quasi-formal SDOs’. These organizations include the Internet
Engineering Task Force (IETF), responsible for the Internet Protocol suite (TCP/IP), and the World Wide
Web Consortium (W3C), the source of the standards underlying the Web.
Examples of standards created by consortia include:
–– The Universal Serial Bus (USB) is a standard hardware interface for attaching peripheral devices to
a computer, which was developed by a consortium of companies (including Intel, Compaq, Digital,
IBM, Microsoft, NEC and Nortel) to enhance physical hardware compatibility by establishing a
specific connector and pin definition. Although USB is an industry-developed specification rather
than a formal standard, USB-enabled hosts and devices today number in the billions.
–– The DVD standard for the digital optical storage of movies, multimedia content or other data on a
12cm disc is standardized by a membership-driven industry association known as the DVD Forum.
As with proprietary specifications, it is not unusual for consortia to have their standards adopted by
formal SDOs.
–– The Compact Disc (CD) standard, originally developed by a Philips-Sony consortium and first
published in 1980, was formalized as an IEC International Standard in 1987 with various amendments
made in 1996.
–– Originally developed by Ericsson, Bluetooth technology was further developed by a consortium, the
Bluetooth Special Interest Group, and subsequently standardized by IEEE.24
–– The widely implemented Common Alerting Protocol (CAP 1.1) is a simple but general format for
exchanging all-hazard emergency alerts and public warnings, disseminated simultaneously over all
kinds of networks. It was originally developed by the Organization for the Advancement of Structured
Information Standards (OASIS), and later standardized by ITU as Recommendation ITU-T X.1303.
3.5
Core principles governing formal standardization processes
The various formal national, regional and international SDOs apply standards-development principles
which differ in certain dimensions but which all broadly conform to the following well-established best
practices in standards development: consensus, trans­parency, balance, due process and openness.
These concepts are briefly outlined below:
–– Consensus: An inclusive standards-development process where all views are taken into account
and the final composition of standards is agreed by all relevant stakeholders. Consensus is not
unanimity, but rather the absence of sustained opposition to substantive issues.25
24
The IEEE 802.15.1 ‘Bluetooth’ standard is no longer maintained, however.
25
ISO/IEC, for example approach the notion of consensus as that of a “General Agreement, characterized by the absence of sustained
opposition to substantial issues by any important part of the concerned interests and by a process that involves seeking to take into
account the views of all parties concerned and to reconcile any conflicting arguments”, noting at the same time that “Consensus
need not imply unanimity”. ISO/IEC Guide 2:2004, Standardization and related activities -- General vocabulary (2004)
Understanding patents, competition and standardization in an interconnected world
22
Part I – Standards and standards development
–– Transparency: Making information available as to the
proposal, development and approval of a technical
standard, in the interests of enabling informed,
equitable partici­pation by all stakeholders.
–– Balance: Stakeholders’ interests should be allowed
equal weight in the standards-development process,
and a standards body’s participation and funding
mechanism should take into account the need
to ensure that no specific interest dominates the
process.
–– Due process: Mechanisms that afford all materially
affected entities the ability to, on an equal footing,
express a position and its basis, have that position
considered and appeal an outcome adversely affecting
that position. Due process ensures an equitable
standards-development process.
Transparency
and openness
“ Standards should be set and adopted
in an open and transparent manner
at all times. This prevents established
players from manipulating the process
to keep innovative companies and their
technologies on the side-lines. A process
that arbitrarily keeps some parties outside
may unfairly benefit those that are on the
inside. This is especially important in those
industries where standards are urgently
needed – such as for digital and Internet
services. ”
Joaquín Almunia, Vice President of the European
Commission responsible for Competition Policy,
speaking at the International Bar Association
Antitrust Conference in Madrid, 15 June 2012,
European Commission - SPEECH/12/453.2010
–– Openness: The standards-development process
should be open to participation by all materially
affected interests. The exact definition of an ‘open
standard’ is the subject of widespread debate,26 with
definitions revolving around the relative ‘openness’
of the standards-development process, the resulting standards and the ownership of the rights
attached to the technologies or techniques contained within a standard.27 The word ‘open’ has also
been applied to software, in the context of free or open-source software, but this concept is rather
different and should not be confused with that of an open standard. Closed standards, in contrast,
are standards that do not satisfy one or more of the abovementioned criteria. Examples of closed
standards are typically proprietary specifications for which the owner does not grant licences, or
standards which are created in a setting accessible by invitation only.
The World Trade Organization’s Committee on Technical Barriers to Trade subscribes to these principles,
in addition recommending the following four principles to clarify and strengthen the concept of
international standards development:28
–– Impartiality: All countries should be afforded equal opportunity to influence or participate in the
international standards-development process, ensuring that standards do not favour any particular
companies, markets or regions.
–– E
ffectiveness and relevance: An effective international standards process is one that responds to
relevant demands for technical standards driven by technological advance as well as regulatory and
market needs.
26
Andersen, P. (2008) Evaluation of Ten Standard Setting Organizations with Regard to Open Standards, Copenhagen: IDC; Krechmer, K.
(1998) ‘The Principles of Open Standards’, Standards Engineering, Vol. 50, no. 6, November/December, pp. 1-6.
27
In ITU, ‘open standards’ are defined as standards made available to the general public and are developed (or approved) and
maintained via a collaborative, consensus-driven and transparent process, from which materially affected and interested parties
are not excluded. ‘Open standards’ facilitate interoperability and data exchange among different products or services and are
intended for widespread adoption. See also Resolution GSC-12/05 of the 12th Global Standards Collaboration meeting (Kobe,
2007), Available: http://www.itu.int/dms_pub/itu-t/oth/21/01/T21010000040011MSWE.doc
28
World Trade Organization (WTO) Committee on Technical Barriers to Trade (2002) Decision of the committee on principles for the
development of international standards, guides and recommendations with relation to articles 2, 5 and annex 3 of the agreement,
G/TBT/1/Rev.8, 23 May, Section IX, [Online], Available: http://ita.doc.gov/td/standards/pdf%20files/WTO%20GTBT1Rev8.pdf
Understanding patents, competition and standardization in an interconnected world
Part I – Standards and standards development
23
–– Coherence: Cooperation and coordination among international SDOs is essential to avoid
the development of conflicting international standards caused by duplications or overlaps of
standardization work.
–– Development dimension: International standards should reflect the needs of all the world’s regions
and measures should be taken to encourage developing countries’ participation in the international
standards-development process.
The implementation of standards is, in principle, voluntary. This is true even for standards developed by
formal SDOs. Although these organizations are formally recognized by national or regional authorities,
the implementation of their standards is, for the most part, voluntary.29
De jure standards are the exception to the general rule of voluntary implementation. Such a standard’s
implementation is mandated by law, by virtue of the standard being created as part of new legislation or
legislation referring to an existing standard (usually developed by a formal SDO). De jure standards can
aim to limit standards battles or ‘platform wars’, attempting to impose certainty by fiat. However, this
imposition may come at a cost if a standard is mandated too early, based on incomplete information,
crowding out the opportunity for the emergence of a superior standard. If too slow to evolve, de jure
standards can hamper innovation, potentially also raising barriers to competition and trade in cases
where the adoption of a standard works to grant market dominance to a small group of companies.
Table 3-2 – Examples of international SDOs and consortia and their standards of
relevance to ICTs
Standards body
29
Type
Technology focus
Notable standards
International
Organization for
Standardization (ISO)
Formal SDO
All technological areas,
including but not limited
to ICT
ISO 9660 (CD File System); ISO 5800
(photographic film speed); ISO/IEC 11172,
13818 and 14496 MPEG suite; ISO
3166 Country codes; ISO 9000 Quality
management; ISO 14000 Environmental
management
International
Electrotechnical
Commission (IEC)
Formal SDO
Electrical, electronic and
related technologiesa
ISO/IEC 11172, 13818 and 14496 MPEG
suite
IEC 62196 for plugs and charging modes
for electric vehicles
Authorities sometimes ask or commission an SDO to develop a specific standard, which is then called a ‘mandated standard’. For
instance, the European Commission regularly mandates ETSI or another recognized body to develop a specific standard, which
is then approved as a European Standard (EN). Notwithstanding the word ‘mandated’, the resulting standard is not mandatory in
terms of implementation. It can be true, however, that implementing a EN standard does have some advantages. This is part of the
so-called European New Approach. A discussion of this policy is beyond the scope of this publication, but the interested reader is
referred to Farr, S. (1996) Harmonisation of technical standards in the EC (Second edition), Chichester: John Wiley & Sons.
Understanding patents, competition and standardization in an interconnected world
24
Part I – Standards and standards development
Standards body
Type
Technology focus
Notable standards
International
Telecommunication
Union (ITU)
Formal SDO
Telecommunicationsb
ITU-T E.164 Numbering Plan; xDSL
standards for Internet access over copper;
Passive optical networks (PONs) for fibreto-the-home (FTTH) Internet; Synchronous
Digital Hierarchy (SDH); Optical Transport
Network (OTN); Fax machines (ITU-T T.30
and ITU-T T.4); Video codecs (ITU-T H.264
AVC and ITU-T H.265 HEVC, developed with
ISO/IEC MPEG)
European
Telecommunications
Standards Institute
(ETSI)
Formal SDO
Telecommunicationsc
Various mobile standards including 2G
GSM, 3G UMTS/W-CDMA, 4G LTE;d
Cordless telephony: DECT; Safety
communications: TETRA; Car safety: eCall
Institute of Electrical
and Electronics
Engineers (IEEE)
Formal SDO
Wide range of electrotechnical arease
IEEE 802.3 Ethernet; IEEE 802.11
Wireless Networking (‘Wi-Fi’); IEEE 1394
‘Firewire’; IEEE 802.15.1 ‘Bluetooth’;f IEEE
802.16 ‘WiMax’ wireless networking;
IEEE 802.15.4 ‘ZigBee’ standard for lowdistance, low-power communications
Internet Engineering
Task Force (IETF)
Consortium
(quasi-formal
SDO)
Internet protocols
Internet Protocol suite (TCP/IP); Hypertext
transfer protocol (HTTP)
World Wide Web
Consortium (W3C)
Consortium
(quasi-formal
SDO)
Web-related standardsh
Hypertext Markup Language (HTML);
Extensible Markup Language (XML)
Organization for the
Advancement of
Structured Information
Standards (OASIS)
Consortium
(quasi-formal
SDO)
Standards for e-business
and Web services
Common Alerting Protocol (CAP); Content
Management Interoperability Services
(CMIS); Electronic Business using XML
(ebXML); Key Management Interoperability
Protocol (KMIP); OpenDocumenti
a
This includes areas such as world plugs, smart grid, functional safety, electromagnetic compatibility, renewable energies and
colour management.
b
ITU Radiocommunication Sector (ITU-R): Spectrum management; Radiowave propagation; Satellite services; Terrestrial services;
Broadcasting services; Science services. ITU Telecommunication Standardization Sector (ITU-T): Operational aspects of service
provision and telecommunication management; Electromagnetic effects, environment and climate change; Broadband cable
and TV; Signalling requirements, protocols and test specifications; Performance, QoS and QoE; Future networks including cloud
computing, mobile and NGN; Multimedia coding, systems and applications; Security, and technical languages and description
techniques.
c
d
The 3G W-CDMA and the 4G LTE standards are developed in collaboration with other regional standards organizations in the
context of the Third Generation Partnership Project (3GPP).
e
including fixed and wireless Local Area Networks, aerospace electronics, antennas and propagation, batteries, computer
technology, consumer electronics, electromagnetic compatibility, green and clean technology, healthcare IT, industry applications,
instrumentation and measurement, nanotechnology, national electrical safety code, nuclear power, power and energy, power
electronics, smart grid, software and systems engineering, and transportation.
f
g
including routing, infrastructure, operations and management, and real-time applications and infrastructure.
h
Web design and applications; Web architecture; Semantic web; XML technology; Web of services; Web of devices; Browsers and
authoring tools.
i
including standards for fixed and wireless communications, content delivery, transportation, interoperability and public safety and
security.
Ratified by IEEE but developed by the Bluetooth Special Interest Group (SIG).
also formalized as an ISO/IEC International Standard.
Understanding patents, competition and standardization in an interconnected world
Part I – Standards and standards development
4.
The advantages and disadvantages of technical standards
4.1
General overview
25
Standards serve the public interest in a variety of ways, and several scholars have worked on quantifying
the economic impact of standards,30 a task made very challenging by the multifaceted nature of
standards’ effects on production, trade and technological progress. It is also important to realize that
standards can have undesirable ‘side effects’.
Table 4-1 provides a brief overview of standards’ possible advantages and disadvantages. Whether they
occur, and to what degree, is often dependent on the exact context in which a standard is developed.
Table 4-1 – Overview of possible advantages and disadvantages of standards
Possible advantages of standards
Encourage innovation and competition
• More suppliers; lower risk for one-supplier
dominated markets
Possible disadvantages of standards
Transfer power to participants in the standard­iza­tion
process
• More competition later in product lifecycle
• Less diversity between technical approaches,
particularly early in product lifecycle
• Lower prices
• Biased to large vendors
• Increased network value for users; greater offer
and lower prices of complementary goods
• Biased to large purchasers
• Higher costs associated with gateways
• Lower switching costs
• Less risk of ‘tying’
Protect markets by obstructing their access
• Easier evaluation of offerings
• Easier communication between actors
Facilitate interoperability
• Easier combination of products or services
• Reduces risk of choosing a future loser
• Easier interchangeability of products or services
• Facilitates certification
Hamper competition through a reluctance to adopt
new or improved standards
• Limiting performance or functionality
Loss of variety
• Fewer products optimized for niche user
groups, users with disabilities, etc.
Increase cost efficiency
• R&D resources are combined
• Less duplicity
Promote national development
• Facilitates market liberalization
• Opens access to international markets
30
See, for example, Blind, K. (2004) The Economics of Standards; Theory, Evidence, Policy, Cheltenham: Edward Elgar Publishing.
Understanding patents, competition and standardization in an interconnected world
26
4.2
Part I – Standards and standards development
Potential advantages of standards
Encourage innovation and competition
Markets look to standards as building blocks of a competitive business environment. Capturing innovation
and proven best practices, standards grant companies access to greater numbers of buyers, sellers and
partners, thereby expanding the scope of opportunities enjoyed by all of a market’s constituents.
Standards can work to ensure that buyers (consumers or intermediate buyers) enjoy a higher degree of
competition, benefiting from lower prices and greater choice of sellers, products and services. Markets
underpinned by standards can be less prone to sellers tying products or services together in such a way
as to make the purchase of one product conditional upon that of another. Again advantageous from a
consumer’s perspective, standards can make it easier to switch suppliers, reducing the risks of getting
‘locked-in’ to any one particular solution; and as products conforming to standards will have common
sets of features, standardization can aid in the comparison of suppliers’ offerings.
Standards can reduce technical barriers to trade and increase competition by laying out the fundamental
norms to which a product or service must conform if it is to function (and compete) effectively within
a larger, global product ecosystem. A product accredited as conforming to an international standard is
marked with a trusted symbol of quality, safety or compatibility, and thus – without expert knowledge of
the company having developed a product or service – a buyer can make an informed purchasing decision
based on what they know of the standard.
Facilitate interoperability
The imperative of technical standardization is extremely evident in the market for ICT, an international
ecosystem demanding widespread adherence to the common standards that act as defining elements
in the global communications infrastructure.
Standards are critical to the interoperability of ICTs and, whether we exchange voice, video or data
messages, standards enable global communications by ensuring that countries’ ICT networks and
devices are ‘speaking the same language’.
International ICT standards can help avoid costly market battles over preferred technologies, limiting
market players’ ability to establish ‘walled gardens’ of proprietary solutions that lock-in customers by
virtue of their not interoperating with solutions provided by other players. Standardization can also reduce
the risks that consumers will select a future ‘loser’ and subsequently be faced with discontinued products
or a lack of complementary products (content, software, etc.).
Increase cost efficiency
Standardized parts and processes were instrumental in the rise of cost-efficient mass production,
enabled by the interchangeability of parts and a greater division of labour and specialization of skills.
Here, standards introduced efficiencies that played a central role in lowering unit costs of production
through economies of scale, and they are today indispensable in the day-to-day operations of modern
economies.
Industrialization and modernization greatly magnified economies’ complexity and – were it not for
standards establishing benchmarks of technological progress and enabling the widespread adoption
of best practices – duplication of research and development (R&D) efforts would have seen constant
‘reinvention of the wheel’ and far more stunted technological innovation and economic growth. In other
words, standards are critical to technology transfer in that they can help ensure that technological
breakthroughs achieved in one country can be replicated elsewhere in the world.
Understanding patents, competition and standardization in an interconnected world
Part I – Standards and standards development
27
Promote national development
Standards also can be an essential aid to developing countries in building their infrastructure and
encouraging economic development. To market players in emerging economies, international standards
can offer an avenue through which to access new markets.
In building a road or railway network, international standards specify the techniques and materials able
to ensure safety and quality. In stimulating domestic economic activity, market players are enriched by
access to greater numbers of buyers and sellers if their products conform to internationally recognized
standards. And in the world of communications technology, conformance with international standards
signifies entry into an international product ecosystem composed of a multitude of other products
designed with compatibility in mind.
However, inequality in national standards capabilities continues to contribute to the persistence of the
digital divide between developed and developing countries, as well as to disparities in opportunities for
economic development and technological innovation.
Countries with relatively well-developed standardization capacities stand to gain the most from standards’
ability to promote trade and technology transfer. A country with expert knowledge of standards and
how to implement them will produce goods and services that can be exchanged with other countries,
based on common recognition of international standards. The same logic applies to technology transfer.
Standards lay out detailed plans for cutting-edge innovations or best practices, but knowledge of these
standards and the ability to implement them as intended are preconditions for standards-enabled
technology transfer.
ITU’s ‘bridging the standardization gap’ programme
ITU has a longstanding commitment to improving opportunities for developing countries to develop and implement
ICT standards, and is seeking to identify remaining standardization disparities and recommend actionable measures
that can help to overcome them. To this end, ITU’s Telecommunication Standardization Sector (ITU-T) has embarked
on an ambitious effort to bridge the standardization gap between developing and developed countries.
The overarching goal of ITU-T’s ‘Bridging the Standardization Gap’ (BSG) programme is to facilitate increased
participation of developing countries in international standardization, to ensure that developing countries experience
the economic benefits of associated technological development and to reflect the requirements and interests of
developing countries in the standards-development process.
The ‘standardization gap’ is defined as disparities in the ability of developing countries, relative to developed ones,
to access, implement, contribute to and influence international ICT standards, specifically standards developed
by ITU (called ‘Recommendations’). One of the main weaknesses identified by ITU studies assessing the
standardization capabilities of developing countries was that participation by developing countries in international
ICT standardization is hampered by a lack of understanding of the importance of ICT standards, which results in
inadequate funding at the national level for standardization work and the coordination of a country’s participation
in international standards forums.
Two ITU reports are available on BSG: Measuring and reducing the standards gap31 and ICT standardization
capabilities of developing countries.32
ITU also developed guidelines33 for developing countries to establish ‘national standardization secretariats’ in the
interests of enhancing their contribution to international standardization activities.
31
ITU-T Research Project: Measuring and Reducing the Standards Gap (2009), [Online], Available: https://www.itu.int/dms_pub/itu-t/
oth/32/02/T32020000010001PDFE.pdf
32
ICT Standardization Capabilities of Developing Countries (2012), [Online], Available: http://www.itu.int/dms_pub/itu-t/oth/0B/1F/
T0B1F0000013301PDFE.pdf
33
Guidelines on the Establishment of a National Standardization Secretariat for ITU-T (2014), [Online], Available: http://www.itu.int/en/
ITU-T/gap/Documents/NSSGuidelines.pdf
Understanding patents, competition and standardization in an interconnected world
28
4.3
Part I – Standards and standards development
Potential disadvantages of standards
Transfer of power to standardization participants
Allowing a group of companies to develop and agree on a standard (often a select group of companies,
not reflecting every current and future implementer of the standard) carries the risk that the resulting
standard will be advantageous to some, and less so to others. This can adversely affect the wellbeing
of consumers as well as other producers by limiting product choice and diminishing rival companies’
ability to compete. Similarly, the decision-making procedures of a standards-development process
may be biased towards the interests of large producers or, sometimes, large buyers (e.g. government
departments as buyers, or large telecommunication network operators).
Companies banding together to develop a standard effectively agree to implementing a common
solution. In some cases, this can decrease competitive pressure to the extent that it diminishes
the diversity of technical approaches available in favour of the agreed standard. In contrast, where
standards are absent, companies may compete much more aggressively to win consumers over to
their own platform.
Finally, participants in the standardization process willing to contribute their technology to a standardssetting effort are generally doing so on the basis of it being advantageous to their business model.
It is certainly the case that a contributor may seek endorsement of their solution via international
standardization with a view to their technology finding greater deployment and thus competitive
advantage. Consider a company that has already made large investments in the deployment of a
particular technology, for example, an interface for third-party products. Such a company would have
a strong incentive to campaign for this interface’s selection as an international standard – which raises
the risk that companies participating in a standard’s development will influence the process in a way
that favours narrow commercial interests over those of the broader market. Further, certain companies
whose business model includes the active monetization of their standard-essential patents also will
have an interest in the standard’s outcome.
Market protection and obstruction of market access
When countries set standards unilaterally, they can be used as a form of protectionism. Recognizing
this potential for trade disputes, GATT member countries adopted the Technical Barriers to Trade (TBT)
agreement in an effort to limit such uses of standards. According to the TBT agreement, governments
cannot arbitrarily choose a standard: the choice of a standard must be supported by ‘sound science’
that confirms its ability to achieve a legitimate objective. The adoption of international standards
largely avoids this problem, and the TBT agreement thus encourages countries to adopt international
standards wherever appropriate. ISO, IEC and ITU, among others, facilitate international cooperation
in standardization.
A market requiring that foreign companies comply with domestic standards can raise costs and deter
market entry, a well-known example being the fragmented implementation of TV standards that slowed
the growth of a global TV market. The US and Japan supported NTSC; SECAM was adopted in France,
Greece, Eastern Europe and Russia; and PAL was used by the rest of the world.
Reluctance to adopt new or improved standards
In certain cases, the costs associated with migrating to a new standard may create a degree of inertia
in its adoption, especially where the older standard has been widely implemented. This seems to be
the case with the next-generation suite of IP standards, IPv6, where adoption has been slow despite
Understanding patents, competition and standardization in an interconnected world
Part I – Standards and standards development
29
broad agreement that IPv6 take-up is necessary given the diminishing number of IPv4 addresses and
that the new IP suite is technically superior to its predecessor. This is partly attributable to the fact
that there is no clear benefit to being an early adopter, in that you can only use the new protocol once
the people you communicate with have also upgraded. However, most commentators have steered
clear of recommending government intervention, believing that IPv6 will steadily become more widely
adopted. Governments, as major ICT users, are instead expected to play a strong role in leading
implementations.
Loss of variety
The availability of widely deployed, successful standards may also result in a loss of variety, and here
non-standards-based products are needed to serve a larger diversity of niche user groups. A standard
will necessarily be built around the market’s largest common denominator, and specific user groups
may not find the feature set they are looking for – be it greater performance and versatility, or lowercost products with more basic functionality.
Understanding patents, competition and standardization in an interconnected world
Part II – General concepts of patent law and competition law
31
Part II – General concepts of patent law and competition law
5.
General concepts of patent law..............................................................................33
5.1 Objectives and scope of patent law................................................................33
5.2 Four challenges of the patent system affecting the standardization
ecosystem........................................................................................................34
Proliferation of patents and the effects on backlog and uncertainty..........34
Quality of patent searches and examinations.............................................36
Patent thickets.............................................................................................36
Non-practising entities and patent trolls.....................................................37
5.3 Other forms of intellectual property rights relevant to standardization...........38
Characteristics of copyright.........................................................................38
Characteristics of trademarks .....................................................................38
6.
General concepts of competition law.....................................................................39
6.1 Objectives and scope of competition law ......................................................39
Prohibiting agreements, collaborations or practices between
market players which may restrict free trading or competition between
businesses...................................................................................................40
Prohibiting abusive conduct by a dominant market player.........................41
Monitoring market concentration and mergers..........................................41
6.2 Competition law in a standards-setting context..............................................42
7.
Interplay between patent law and competition law.............................................44
7.1 General treatment of patents under competition law.....................................44
7.2 Anti-competitive conduct involving standard-essential patents......................46
Understanding patents, competition and standardization in an interconnected world
32
Part II – General concepts of patent law and competition law
Introduction and objectives of Part II
Patent law, competition law and standardization systems are designed to support and incentivize
innovation and technological progress.
The patent system rewards creativity, and patents can be used as a measure of the rate of
innovation or knowledge accumulation. Inventions that meet the requirements of patentability
are granted a temporary monopoly by giving innovators the right to exclude others from adopting
and profiting from their inventions. In parallel, the publication of patents and patent applications
are marks of the creation and further dissemination of new knowledge.34 The patent system of
today faces major challenges rooted in the proliferation of patents and its effects on backlog and
uncertainty, the quality of patent searches and examinations, and certain strategic behaviour by
patent owners.
Competition law discourages collusive or monopolistic market behaviour that adversely affects
competition and innovation. Competition law encourages innovation by prohibiting market
behaviour (‘conduct’) that restricts access to a market or otherwise negatively affects domestic
or international trade. Competition law is built on three pillars: (1) prohibiting agreements,
collaborations or practices between market players which may restrict free trading or competition
between businesses; (2) prohibiting abusive conduct by a dominant market player; and (3)
monitoring market concentration and mergers.
Standardization seeks to scale-up the benefits of an innovation, bringing experts together to
codify best practices in the interests of encouraging widespread adoption. Standardization is a
form of collaboration among competing market players, with potentially anti-competitive effects;
however, competition authorities and courts agree that standardization provides significant
benefits to competition and consumers by enacting economies of scale, interoperability and
compatibility, greater choice and more affordable products. Given the risks attached to the
collaboration of ordinarily competing interests, certain conduct is prohibited in a standardssetting context, such as discussions on product prices and pricing strategies, or allocations of
business-sector or geographic market shares.
Upon completion of Part II, the reader should have a good understanding of:
–– Patents and the requirements of patentability;
–– The organization of the global patent system, and the challenges it is facing;
–– The general rules and mechanisms in competition law; and
–– H
ow competition law is applied to standards-development processes and the inclusion of
patents in standards.
34
See, for example, Romer, P.M. (1986) ‘Increasing Returns and Long-Run Growth’, Journal of Political Economy, vol. 94,
no. 5, October, pp. 1002-1037, Chicago, IL: The University of Chicago Press, [Online], Available: http://www.jstor.org/
stable/1833190
Understanding patents, competition and standardization in an interconnected world
Part II – General concepts of patent law and competition law
5.
General concepts of patent law
5.1
Objectives and scope of patent law
33
Generally speaking, the patent system is designed to encourage technological innovation by rewarding
intellectual creativity. It is society’s formal mechanism that provides creators of technical inventions
with the possibility of receiving just reward for their time, money and expertise invested in achieving
an advance deserving of a patent.
The patent system is based on the premise that innovators are more likely to invent, and disclose their
knowledge to the public, if supported by a system that assures an innovator the right to exclude others
from exploiting the invention for a limited period of time. Patents thus secure their owners the right to
exclude others from making, using, selling or importing an invention, typically for a period of 20 years.
Society at large benefits from the granting of patents through the publication and dissemination of the
specifics of a patented invention.
The patent system is a social contract or quid pro quo between the applicant and society at large. To
incentivize research that yields breakthroughs of great value to society in the long run, patents award
innovators exclusive rights to profit from the commoditization of an invention in the short run.35
An invention must meet certain requirements in order to obtain a patent. For example, it must be new
(novel), involve an inventive step (non-obvious), and be capable of industrial application. In general, an
invention is considered new if it does not form part of the ‘state of the art’, a term describing in most
countries everything known or used by the public, in any way, anywhere in the world, before the date
of filing a patent-application. An invention is considered to involve an inventive step if it is not obvious
to a skilled person (usually in that particular technical field) with knowledge of the state of the art. The
evaluation of whether an invention is new and not obvious occurs by comparing the invention with
other inventions already known at the time (e.g. as set out in other patent applications or in technical
publications, or by looking at products already on sale). These inventions are referred to as “prior art”.
Many countries have adopted specific exclusions to patentability, prohibiting the award of patents
for advances such as discoveries of substances, plants or animals already existing in nature, or
developments and proofs of scientific or mathematical theories. However, with rare exceptions,
all forms of innovation are eligible to be patented, if they are found to meet the requirements of
patentability.
A patent can serve very different purposes, depending on its holder’s objectives. Patents can be used
to preserve patent holders’ market dominance by preventing competitors from adopting patented
inventions. Conversely, patents can also be licensed to third parties to encourage the adoption of
35
While not every invention (or patent) is necessarily the result of costly research, inventions are more often than not the results of
systematic investment in R&D. It is not surprising, then, that studies systematically find a positive link between patent activities
and performance of companies and countries. See, for example – Organisation for Economic Co-operation and Development
(OECD) (2009) Patent Statistics Manual, [Online], Available: http://browse.oecdbookshop.org/oecd/pdfs/free/9209021e.pdf – which
mentions various studies that find an increased correlation between patents and companies’ R&D performance ratings.
Understanding patents, competition and standardization in an interconnected world
34
Part II – General concepts of patent law and competition law
inventions, or used to facilitate access to third-party patents through mechanisms such as crosslicensing arrangements. In addition, large patent portfolios are often used for defensive purposes,
protecting owners from potential patent-infringement lawsuits stemming from their use of competitors’
intellectual property.
5.2
Four challenges of the patent system affecting the standardization
ecosystem
Criticism of the patent system’s shortcomings has grown, calls for reform have arisen36 and increased
attention is being paid to the patent system’s potentially negative side-effects on technological
progress and socio-economic welfare.37
Proliferation of patents and the effects on backlog and uncertainty
Modern national patent offices were established between the late 18th and 19th centuries. The number
of patent applications received and patents granted by such offices has fluctuated over time but, for
the most part, the growth rates of patent grants remained relatively stable until the 1980s, a decade in
which growth rates began to dwarf those observed in the past.
Figure 5-1 offers an illustration of the rising number of patent applications received and patents
granted by the US Patent and Trademark Office (USPTO). A range of possible explanations for these
exponential growth rates have been put forward, attributing them to the growth of international trade,
globalization of production chains, greater international collaboration in R&D, and the ever-increasing
speed of technological innovation in developed and developing countries alike.38
Others, however, emphasize that institutional changes and developments in jurisprudence – which have
improved the position of patent owners in terms of the likelihood of their winning patent-infringement
lawsuits – are important reasons for this intensification of claims to intellectual property.39
36
European Patent Organisation (EPO) (2007) Scenarios for the future: How might IP regimes evolve by 2025? What global legitimacy
might such regimes have?, [Online], Available: http://www.epo.org/news-issues/issues/scenarios/download.html; U.S. Federal
Trade Commission (FTC) (2011) The Evolving IP Marketplace: Aligning Patent Notice And Remedies With Competition, [Online],
Available: http://www.ftc.gov/os/2011/03/110307patentreport.pdf
37
Examples of well-known critiques include Jaffe, A. B. and Lerner, J. (2006) Innovation and Its Discontents: How Our Broken Patent
System is Endangering Innovation and Progress, and What to Do About It, Princeton, NJ: Princeton University Press; Bessen, J.
and Meurer, M. J. (2008) Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk, Princeton, NJ: Princeton
University Press; and, Boldrin, M. and Levine, D.K. (2008) Against Intellectual Monopoly, Cambridge: Cambridge University Press.
38
World Intellectual Property Organization (WIPO) World Intellectual Property Indicators 2012, [Online], Available: http://www.wipo.
int/ipstats/en/wipi/index.html
39
See, for example, Jaffe and Lerner (2006), op cit.
Understanding patents, competition and standardization in an interconnected world
Part II – General concepts of patent law and competition law
35
Figure 5-1 – Number of patent applications received and patents granted by
the US Patent and Trademark Office, 1790-2010 40
Unprecedented growth rates began to take hold in the 1980s and have been sustained into the new
millennium. As shown in Figure 5-2, from 2003 to 2012 the total number of patents granted by the
world’s five largest patent offices almost doubled, rising from 500 000 to 924 000.
Figure 5-2 – Annual number of patents granted by
the world’s five largest patent offices 41
40
United States Patent and Trademark Office (USPTO), U.S. Patent Activity Calendar Years 1790 to the Present: Table of Annual U.S.
Patent Activity Since 1790, [Online], Available: http://www.uspto.gov/web/offices/ac/ido/oeip/taf/h_counts.htm
41
fiveIPoffices (2013) 2012 key IP5 statistical data, [Online], Available: http://www.fiveipoffices.org/stats/keydata.pdf
Understanding patents, competition and standardization in an interconnected world
36
Part II – General concepts of patent law and competition law
This growth of patent applications has added to the workload of patent offices, creating backlogs of
unprocessed applications which often span years.42 These backlogs create uncertainty, acting to the
detriment of patent applicants as well as potential competitors unsure as to whether or not they have
the ‘freedom to operate’ in the field in question. The longer the patent search and examination process,
the longer the pendency of patent applications, thus affecting the amount of time organizations might
have to delay important business decisions.
The sheer scale of the number of patents and patent applications worldwide has introduced considerable
challenges in the identification of patent infringements,43 and concerns have been expressed that large
numbers of patents in a market might create ‘patent thickets’ that create barriers to market entry or the
commercialization of new products.
Quality of patent searches and examinations
The proliferation of patent applications has led to concerns around the quality of patents granted. A
high-quality patent-search and examination process is essential to ensure that exclusive rights to profit
from an innovation are only granted for genuine inventions, i.e. inventions that are new and contain an
inventive step.44
As an example, only half of the patent applications filed with the European Patent Office (EPO) are
granted, with the other half either refused or withdrawn during the examination process. Of the patents
granted, approximately half have their scope reduced by EPO.
High-quality patent searches and examinations act to reduce patent thickets at source, maximize the
transparency of the patent system and reduce the number of patents that will later be subject to
invalidation. Decreasing the pendency of patent applications is also critical in providing indications as
to the likelihood of an innovation being awarded a patent, especially to inform the strategic decisions
of market players active in high-tech industries characterized by shortening product lifecycles.
Access to the appropriate ‘prior art’ in any particular field, described by both patent-related and nonpatent-related literature, is an essential part of ensuring high-quality patent grants. Determining the
most relevant prior art with which to compare an application for a new patent – in the examination of a
patent’s credentials in terms of novelty and inventive step – poses another significant challenge to the
patent system in that the quantity of relevant prior art continues to increase exponentially.
Patent thickets
The proliferation of patent applications and corresponding approval procedures has stimulated
enormous growth in the number of patents granted, and this is especially true for the ICT sector. Carl
Shapiro, a leading US academic, wrote in 2001, ‘... thoughtful observers are increasingly expressing
concerns that our patent (and copyright) system is in fact creating a patent thicket, a dense web of
42
By November 2013, the USPTO had an average backlog of over two-and-a-half years, according to USPTO Data Visualisation Center
Patents Dashboard, [Online], Available: http://www.uspto.gov/dashboards/patents/ main.dashxm. The USPTO is definitely not the
only national patent office with a long backlog of applications. In addition, the actual backlog per technology area tends to vary
considerably; in some areas it might be twice as long as the average.
43
See Bessen and Meurer (2008), op cit.
44
As mentioned above, other requirements must also be met in order to obtain a patent.
Understanding patents, competition and standardization in an interconnected world
Part II – General concepts of patent law and competition law
37
overlapping intellectual property rights that a company must hack its way through in order to actually
commercialize new technology’.45
Patent thickets emerge as a consequence of the fact that advances in technology are often founded
on numerous prior innovations deemed patentable by patent offices’ application of the standards of
obviousness. For every patent application received, a patent office must determine whether or not the
patent application describes an improvement over the prevailing state of the art significant enough to
merit the protection afforded by a patent. The lower the burden of proof in relation to improvements
over the state of the art, the greater the number of patents granted resulting in increases in the density
of patent thickets. However, refusing patent protection to novel inventions may discourage innovation
by denying inventors the benefits of exclusivity that patents confer. Patent thickets are especially
prevalent in ‘complex’ industries in which cumulative innovation processes typically result in products
covered by numerous patents.
Non-practising entities and patent trolls
The term ‘non-practising entity’ (NPE) refers to any organization that holds a patent but does not practise
it in any of its own products or services. The term therefore describes a wide range of patent owners,
including research universities and public research laboratories. Many of these organizations are highly
inventive. In addition, many private firms conduct advanced research but do not develop products or
services, instead relying on revenue generated by granting others licences to patents resulting from
their research. Here, the patent system allows for the creation of ‘markets for technology’, and this
contribution of public and private research organizations to technological advance is very welcome in
that their specialization may lead to higher levels of innovation.
However, when used in the context of policy discussions, the term NPE sometimes refers to
organizations that have less noble objectives, to the extent that they are often termed ‘patent trolls’ (or
‘patent assertion entities’). Some patent trolls exercise patents that they have earned, but it is more
common that they simply acquire patents on the patent market. The primary business model of such
an organization consists of threatening to enforce their patent rights against alleged infringers, in an
attempt to extort licensing fees.
Patent trolls take advantage of the prohibitively high costs
incurred by defendants in patent-infringement lawsuits,
as well as the business risks associated with having to
modify a product or withdraw from a market as a result
of a successful patent-infringement lawsuit. In fact, legal
procedures against alleged patent infringers are often
instituted only after products have been brought to market,
forcing companies found guilty of patent infringement to
face the extensive switching costs mandated by court
decisions that deny them the right to use the patented
technology. Companies targeted in this manner might
decide to settle out of court and pay licensing fees, even if
the asserted patent is of a low-enough quality to risk being
declared invalid in court.
45
President obama on
patent trolls
“ The folks that you’re talking about
are a classic example; they don’t
actually produce anything themselves.
They’re just trying to essentially
leverage and hijack somebody else’s
idea and see if they can extort some
money out of them.”
US President, Barack Obama, 2013 46
Shapiro, C. (2001) ‘Navigating the Patent Thicket: Cross Licenses, Patent Pools, and Standard-Setting’, in Jaffe, A., Lerner, J. and
Stern, S. (eds.), Innovation Policy and the Economy Vol. 1, National Bureau of Economic Research (NBER), [Online], Available: http://
papers.ssrn.com/sol3/papers.cfm?abstract_id=273550
Understanding patents, competition and standardization in an interconnected world
38
Part II – General concepts of patent law and competition law
5.3
Other forms of intellectual property rights relevant to
standardization
Patents are the most relevant form of intellectual property right (IPR) in the standardization context, but
other issues arise from the inclusion of copyrighted software or trademarks in standards.
Characteristics of copyright
Copyright is a bundle of rights designed to protect literary and artistic works. The aim of copyright
is to promote creativity in diverse areas such as science, culture and the arts by offering rewards to
creators of original works. The balance between fostering creativity and enabling access to works is
achieved through several mechanisms, including limiting the period of time of economic rights and
implementing limitations and exceptions provisions.
Although international instruments aim to harmonize and establish a global minimum standard of
copyright protection, copyright remains territorial in nature, with countries each establishing their own
copyright systems and associated limitations and exceptions applying to various types of works for
which copyright can be granted.
Works eligible for copyright protection are all, as a rule, original intellectual creations. National copyright
laws contain non-exhaustive, illustrative enumerations of these types of works, and such lists often
include books, films, computer software, photographs and musical works. A work must be an original
creation in order to obtain copyright protection, which will protect the form of expression, but not the
ideas used as a basis for that work.
There are two aspects to copyright, namely economic rights and moral rights. Economic rights protect
the financial interests of an original work’s creator, whereas moral rights aim to protect the intellectual
and non-financial interests of a work’s creator, for example, by offering a legally enforceable guarantee
that a work will not be misrepresented by others as their own.
The most widely recognized economic right under copyright is the exclusive right of reproduction,
which allows the copyright owner to prevent others from making and benefiting from copies of an
original work without permission.
Characteristics of trademarks
A trademark is a sign capable of distinguishing the goods or services of one enterprise from those of
another. The main function of a trademark is to enable consumers to identify products (whether goods
or services) as attributable to a particular company, thereby distinguishing a company’s products from
identical or similar products offered by competitors.
Trademarks also provide incentive for companies to invest in maintaining or improving the quality of
their products, in an effort to ensure that their trademarks continue to symbolize high quality. Trademark
registration, under relevant trademark law, gives companies the exclusive right to prevent others from
marketing identical or similar products under the same name or a mark so similar to the protected
trademark that it confuses consumers. Trademark protection is usually achieved through trademark
registration, although in some countries it can also be obtained through use.
46
Sternberg, A. (2013) Obama acknowledges patent troll problem (w/transcript), Project DisCo (Disruptive Competition), [Online],
Available:
http://www.project-disco.org/intellectual-property/021413-obama-acknowledges-patent-troll-problem-w-transcript/
[14 February 2013]
Understanding patents, competition and standardization in an interconnected world
Part II – General concepts of patent law and competition law
6.
General concepts of competition law
6.1
Objectives and scope of competition law
39
Competition law, also referred to as ‘antitrust’ or ‘anti-monopoly’ law, is a form of market regulation that
aims to create a competitive business environment through the prohibition of conduct that restricts
access to a market or otherwise negatively affects domestic or international trade.
The primary objective of competition law is to protect consumers by promoting and maintaining a
market environment where businesses can compete on a level playing field. Increased competition
among suppliers gives customers greater choice, which, in turn, prompts suppliers to innovate and
enhance their productivity and efficiency in order
to offer better products or services at competitive
Competition as a means to
prices.
promote innovation
Competition legislation provides a legal framework
that limits market players’ ability to benefit
“ Competition is also essential to promote
themselves at the expense of the efficiencies
innovation. Firms facing competitive rivals
gained in free trade. Business naturally acts in selfinnovate more than monopolies (although after
interest, and the difficult task of distinguishing antisuch competition a firm may of course end up
competitive behaviour from competitive behaviour
with a monopoly through a patent). Competitive
requires a legal regime, often including expert law
mechanisms can even help deliver on other
strategic objectives, like environmental or
enforcement agencies or regulators that monitor
health benefits. It all depends on good design.
market participants and enforce competition
If companies are rewarded for producing the
laws against suspected violators. Increasingly,
things we value, competition between them
competition laws empower private citizens who
gives them the incentive to do so still better.
believe that they have been injured by violations of
Equally, if markets reward bad behaviour, then
competition laws to seek judicial redress.
companies will behave badly. ”
Signs of competition regulation can be traced as far
Angel Gurría, OECD Secretary-General, 27-9-2013 47
back as the Roman Empire and the Middle Ages, but
competition rules as we know them today were first
enacted in Canada and the US48 at the end of the 19th century when state authorities outlawed market
behaviour in which large companies cooperated with rivals (forming ‘cartels’) to fix outputs, prices or
market shares.
The adoption of competition laws has increased over the past three decades. Today, most nations
have both competition laws and national competition regulators. Competition law varies across
jurisdictions, both in terms of the law’s substance and of the procedures involved in its administration.
Some government systems provide for multiple levels of enforcement, at the national level as well as
the sub-national level, for example in states or provinces. In Europe, the European Union forms a supranational level of enforcement.
47
Remarks by Angel Gurría, OECD Secretary-General, at The Future Ain’t What it Used to Be - 20 Years of Competition Law and
the Challenges Ahead, Reykjavík, Iceland, 17 September 2013, [Online], Available: http://www.oecd.org/competition/20-years-ofcompetition-law-and-the-challenges-ahead.htm
48
This so-called ‘Sherman Antitrust Act’, adopted in 1890, was the first U.S. federal statute to limit cartels and monopolies and still
forms the legal basis for a significant portion of US competition enforcement at a federal level. Although its reference to ‘trusts’
seems somewhat anachronistic today, it should be kept in mind that at the time of its adoption ‘trusts’ were a very popular way for
the industrialists of that era to maintain a monopoly or to create cartels.
Understanding patents, competition and standardization in an interconnected world
40
Part II – General concepts of patent law and competition law
In some countries, a violation of competition legislation amounts to a criminal offence. In addition to
government enforcement, usually performed through dedicated competition regulators or authorities,
some countries permit their competition laws to be enforced through lawsuits initiated by private
parties. For example, in a situation where a group of competitors colludes to create artificially high
prices, a customer might sue to recover the amount overcharged during the period over which the
pricing agreement was in force. Despite trends towards private enforcement of competition laws,
countries allowing it remain in the minority.
International or intergovernmental organizations – such as the United Nations Conference on Trade and
Development (UNCTAD) and the Organisation for Economic Co-operation and Development (OECD) –
have published recommendations outlining sets of principles that developing countries can apply as
tools to build competitive markets,49 also encouraging collaboration among countries in the field of
competition law to promote the convergence of different regulatory systems. National competition
regulators around the world have formed an informal collaborative network to coordinate their
enforcement of competition laws.50 Organizations such as WTO continue to examine the interaction
between competition laws and international trade.51
Competition law and its associated monitoring and enforcement activities serve three main purposes:
1) prohibiting agreements, collaborations or practices between market players which may restrict free
trading or competition between businesses; 2) prohibiting abusive conduct by a dominant market
player; and 3) monitoring market concentration and mergers.
Prohibiting agreements, collaborations or practices between market players which
may restrict free trading or competition between businesses
Competitive markets afford all players fair opportunity to pursue increases in market share, incentivizing
innovation and keeping prices competitive. Agreements, arrangements or practices between
competitors which substitute the risk of competition with the comfort of cooperation52 are considered
potentially harmful to competition and efficient economic activity.
Agreements encompass formal contracts or arrangements between market participants, as well as
concerted practices or other informal ‘gentlemen’s agreements’. In certain scenarios, competitors’
sharing sensitive commercial information can amount to anti-competitive behaviour. Other examples
of agreements able to restrict or distort competition include collaboration aimed at price-fixing, or
limiting or controlling production outputs or technical development to the benefit of a select group of
businesses. These agreements could be horizontal, agreed between competitors, or vertical, agreed
between companies at different levels of the value chain.
49
United Nations Conference on Trade and Development (UNCTAD) (2000) The United Nations Set of Principles and Rules on
Competition, [Online], Available: http://r0.unctad.org/en/subsites/cpolicy/docs/cpset/rbpc10rev20en.pdf; and OECD Competition,
[Online], Available: http://www.oecd.org/competition/
50
International Competition Network: http://www.internationalcompetitionnetwork.org/
51
World Trade Organization (WTO) Interaction between Trade and Competition Policy, [Online], Available: http://www.wto.org/english/
tratop_e/comp_e/comp_e.htm
52
European Court Justice (Fifth Chamber) (31 March 1993) A. Ahlström Osakeyhtiö and others v Commission of the European
Communities, Joined cases C-89/85, C-104/85, C-114/85, C-116/85, C-117/85 and C-125/85 to C-129/85, European Court reports
(1993), pp. I-01307, para.63, [Online], Available: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:61985J0089%2801
%29:EN:HTML .
Understanding patents, competition and standardization in an interconnected world
Part II – General concepts of patent law and competition law
41
Prohibiting abusive conduct by a dominant market player
Anti-competitive conduct by a company with significant market share or market power, and thus
increased influence over market direction, could have far-reaching consequences for competition.
A dominant market player leveraging its market position to retain dominance can pose a threat to
competition and consumer welfare.
Examples of such anti-competitive practices include: excessive pricing, overcharging customers by
exploiting the absence of alternative products; predatory pricing, selling below cost in order to drive
competitors out of a market53; product tying, making the sale of one product a condition for the sale of
another; and boycotting, refusing competitors access to facilities essential to business in a particular
market.
It is not dominance or monopoly that competition law prohibits, but rather the abuse of that dominance
by engaging in certain anti-competitive practices. Opportunity to gain greater market share and revenue
is a key incentive to innovation, and competition law seeks to ensure that market share is gained or
preserved through legitimate business practices.
Monitoring market concentration and mergers
Merger control laws and regulations aim to prevent any anti-competitive consequences arising
from concentrations in the market, caused for instance by company mergers and acquisitions that
confer collective market dominance on the companies involved. The basic premise behind these
regulations is that market pluralism allows for competition between companies, and hence greater
choice and more affordable products on offer to consumers. Market concentration, in contrast,
has the potential to allow a monopoly or oligopoly of a small group of companies to abuse their
dominant market positions to harm competition, reduce choice or increase prices, among a range
of other effects to the detriment of consumers. Horizontal or vertical in relation to the value chain,
mergers include competitors uniting in common purpose or buyers and suppliers conjoining their
business operations to gain efficiency. Competition law often requires that significant, large-scale
mergers – in terms of participants’ market shares, the geographical area affected, or the nature
of the participants’ business – be accompanied by a notification to and clearance by one or more
competition regulators. The ‘clearance’ for a merger granted by a regulator is often subject to certain
‘commitments’ or ‘remedies’ that the merging entities are required to undertake. These can include
both ‘structural remedies’, such as requirements to divest part of a company formed through a
merger or acquisition, and ‘behavioural remedies’, such as those that aim to ensure that certain
fundamental facilities remain open to dominant companies’ competitors.
53
While excessive pricing is a concern when potential competition (like market entry by other firms) is unlikely, predatory pricing is
more of a concern when potential competition is likely.
Understanding patents, competition and standardization in an interconnected world
42
Part II – General concepts of patent law and competition law
Google’s acquisition of Motorola Mobility
An example of an intercontinental merger is Google’s acquisition of Motorola Mobility. In 2011, a couple
of months after Motorola Mobility’s spin-off into an independent entity (focusing on the manufacture of
mobile phones and tablets), Google announced that it would acquire the company, subject to regulators’
approval. The proposed acquisition warranted analysis under merger control legislation, taking into
account the size of the two companies and their positions in the markets concerned.
The analysis looked at whether Google would have the ability and incentive to prevent Motorola’s
competitors from using the Android platform, as well as the value of Motorola’s considerable patent
portfolio (which includes numerous patents that are essential to ICT standards) and the potential effect
on competition should Google assert Motorola IP assets aggressively.
The proposed merger was cleared by regulators as Android helps Google to profit from its other services
and it was therefore considered unlikely that Google would restrict the platform solely to Motorola
devices. The threat of restriction of competition through abusive assertion of Motorola’s patents was
considered limited, given that Google also assured regulators that it would honour Motorola’s prior
commitments to license any standard-essential patents (SEPs) on reasonable and non-discriminatory
(RAND) terms.
6.2
Competition law in a standards-setting context
Standards are developed by formal or quasi-formal bodies such as SDOs, forums and consortia. The
memberships of these bodies comprise market participants that work together to develop and reach
agreement on technical standards. In theory, this could be seen as an agreement, collaboration or
practice between competitors that distorts competition - a form of collusion that competition law aims
to prevent.
Competition authorities and courts have a different view, repeating in a large number of cases that
standardization provides significant stimulus to innovation, substantial efficiency gains and benefits to
consumers, by underpinning the interoperability and compatibility of different manufacturers’ products,
reducing transaction costs and encouraging the achievement of economies of scale.
Agreements among market participants that lead to the creation of new standards, though not exempt
from scrutiny within the bounds of competition law, do not normally raise any concerns in relation to
anti-competitive behaviour.
Despite the many acknowledged benefits of standardization, standards might in some circumstances,
depending on their scope and the intentions of participants in standards development, ‘[give] rise to
restrictive effects on competition by potentially restricting price competition and limiting or controlling
production, markets, innovation or technical development’.54
54
EC (2011) Communication from the Commission - Guidelines on the applicability of Article 101 of the Treaty on the Functioning
of the European Union to horizontal co-operation agreements, para. 264, [Online], Available: http://eur-lex.europa.eu/LexUriServ/
LexUriServ.do?uri=CELEX:52011XC0114(04):EN:NOT
Understanding patents, competition and standardization in an interconnected world
Part II – General concepts of patent law and competition law
43
Competitors gathered in a standardization expert group could share confidential information regarding
IPR licensing practices, product prices or levels of planned production outputs. Divulging or exchanging
business-sensitive information within standards-setting activities could potentially constitute collusion
with respect to product prices or other concerted business practices prohibited by competition law
(such as the coordination of planned production outputs, or allocating market shares in a way that
intentionally limits competition). This conduct would clearly exceed the intended scope of a standardsdevelopment process, which is confined to developing and agreeing technical specifications.
With the exception of cases in which participants abuse the standardization process in such a way
as to affect competition adversely, competition regulators note that the pro-competitive effects of
standardization generally outweigh potential limitations to product diversity emerging as a result of
standardization, regardless of whether or not participants enjoy significant collective market share.
In the European Union, for example, the European Commission asserts that standardization effects
working to restrict competition are very unlikely to occur in the absence of market power (that is, where
there is effective competition among a number of voluntary standards of related subject matter). Even
in situations where an agreed standard comes to dominate a market as a result of its widespread
adoption, such an agreement would not raise concerns around threats to competition if the following
non-exhaustive benchmarks are met:55
–– Participation in the standards-development process is unrestricted, with all interested competitors
being allowed to participate in the process that leads to the agreement of standards
–– The procedure to agree or approve standards is transparent and, if possible, selected according to
objective criteria
–– Standardization agreements do not create any obligation to comply with a standard and all
participants and implementers remain free to develop and/or use alternative standards
–– The standard remains accessible to every implementer on royalty-free or otherwise reasonable
and non-discriminatory (RAND) terms. This is usually stipulated by an SDO’s ‘IPR or patent policy’,
which will require that patent owners wishing to have their patents included in a standard make
irrevocable commitments, prior to the agreement or approval of a standard, that they will grant third
parties licences to the patents in question on RAND terms.
Competition regulators support standardization in line with observations that standards are commonly
developed and agreed within standards bodies that adhere to procedures meeting the aforementioned
criteria. In fact, today’s standardization ecosystem relies largely on ‘open standards’, the requirements
of which mirror the suggestions of regulators as to the standardization environment that creates procompetitive effects.
55
ibid, paras. 280-286. The Commission notes that even the non-fulfilment of any or all of these conditions will not lead to a
presumption of restriction on competition, but it will necessitate a case-by-case analysis of whether such a restriction is indeed
caused by the agreement (para.279).
Understanding patents, competition and standardization in an interconnected world
44
Part II – General concepts of patent law and competition law
Antitrust guidelines in formal SDOs
To prevent their members from violating competition law, many SDOs and consortia have published
guidelines or handbooks that inform their participants of the behaviour allowed or not allowed in their
standards-setting activities. The ETSI Guidelines for Antitrust Compliance, for instance, include the
following text: 56
‘Discussions, communications or any other exchange of information in all ETSI meetings, on the edge of
all ETSI meetings (e.g.: informal discussions, social gatherings, corridor talks etc.) as well as during any
activity in ETSI should not have as their subject matter the following topics, discussion of which (among
other things) is prohibited by competition law:
• pricing strategies or product pricing,
• terms and conditions of sale including discounts and allowances, credit terms, etc.
• production levels or capacity,
• limitation of technical development or investment,
• allocation of sales territories, markets or customers,
• market shares,
• submitted bids or intentions to bid,
• preventing anybody from gaining access to any market or customer for goods and services,
• refusals to deal or do business with competitors, vendors or suppliers and
• ongoing litigation or threatened litigation.
Even the appearance of any discussion, communication or exchange of information that appears to be
leading to restraints on competition of any kind should be carefully avoided.’
7.
Interplay between patent law and competition law
7.1
General treatment of patents under competition law
At first glance, it might appear that patent law and competition law are at cross-purposes. Intellectual
property laws protect the exclusive rights of an innovator to the benefits stemming from an invention.
Patent law can thus pose legal barriers to third parties’ use of protected inventions and, in this sense,
intellectual property rights can serve to restrict free-market competition.
However, the two bodies of law are not as mutually opposed as they might first appear. The exclusive
rights held by the owner of a valid patent do not necessarily confer on the patent holder a strong
market position, and, in practice, there is often strong competition among market players responsible
for numerous patented innovations and the products that embody them. Intellectual property law and
competition law thus share the aim of creating a regulatory environment that promotes innovation and
economic development, rewarding innovators and protecting market competition.
56
European Telecommunications Standards Institute (ETSI) (2011) ETSI Guidelines for Antitrust Compliance, Version adopted by Board
#81, 27 January, [Online], Available: http://www.etsi.org/images/files/IPR/etsi%20guidelines%20for%20antitrust%20compliance.
pdf
Understanding patents, competition and standardization in an interconnected world
Part II – General concepts of patent law and competition law
The economic relationship between competition,
patents and innovation is complex, but economic theory
suggests that the effects of competition on patent
applications is dependent on the strength of competition
in a market. The proposition is that strong competition
creates more incentive for competitors to innovate and
seek protection for the product of that innovation through
patent filings. There are many more factors at play in
this relationship, but competition having the effect of
stimulating innovation and patent filings seems to hold
true for the ICT industry. Patents awarded in relation to
ICTs – such as networking technologies, information
processes, telecommunications, semiconductors and
computer systems – have accounted for nearly 40 per
cent of all US patents granted over the past decade.57
45
The relationship between ipr and
competition policy
“ In our view, antitrust law and policy should
be careful not to constrain the legitimate
exercise of intellectual property rights.
We need to ensure that the application of
antitrust laws does not illegitimately stifle
innovation and creation by condemning procompetitive activities that would maximize
incentives for investments or efficiencymaximizing business arrangements. ”
Makan Delrahim, Deputy Assistant Attorney General,
Antitrust Division, US Department of Justice
The interplay between competition law and intellectual
property rights is beyond the scope of this publication, but a few underlying principles should be kept
in mind:
As a general rule, the exercise of intellectual property owners’ rights to exclude others from using their
patented innovations should not raise concerns under competition law. Regulators and courts have
often confirmed, for example, that the enforcement of intellectual property rights does not, as such,
constitute an abuse of a dominant market position.58 Competition law, in parallel, generally avoids
stipulations that compel owners of valid patents and copyrights to license them to competitors where
they have previously refused to do so.
With respect to the contractual terms of licensing agreements, the views of regulators share a common
denominator in the understanding that most IPR licensing agreements are pro-competitive and enhance
economic development.59 Competition regulators in major jurisdictions have issued guidelines in which
they describe the details of their policies as regards IPR licensing agreements between competitors.60
Abuse of the IPR system can constitute behaviour prohibited by competition law in the context of
efforts to leverage the power of valid intellectual property rights to maintain or extend a dominant
market position. Competition law thus often provides that, if intellectual property rights confer on their
owners market dominance, this dominance should not be abused by forcing licensees to purchase
57
U.S. National Science Board (2012) ‘Chapter 6: Industry, Technology, and the Global Marketplace’, Science and Engineering
Indicators 2012, [Online], Available: http://www.nsf.gov/statistics/seind12/c6/c6s4.htm
58
The U.S. Supreme Court in Trinko noted, for example, that “[t]o safeguard the incentive to innovate, the possession of monopoly
power will not be found unlawful unless it is accompanied by an element of anticompetitive conduct,” Verizon Communications
Inc. v. Law Offices of Curtis V. Trinko, LLP 540 US 398 (2004) 305 F.3d 89
59
For example, the U.S. Department of Justice (DoJ) and Federal Trade Commission (FTC) guidelines note that “intellectual property
licensing allows firms to combine complementary factors of production and is generally procompetitive.” U.S. DOJ and FTC (1995)
Antitrust Guidelines for the Licensing of Intellectual Property, [Online], Available: http://www.justice.gov/atr/public/guidelines/0558.
htm;
60
For example, the U.S. DOJ and FTC (1995) Antitrust Guidelines for the Licensing of Intellectual Property, op. cit.; the Japan Fair Trade
Commission (2007) Guidelines for the Use of Intellectual Property under the Anti-Monopoly Act, [Online], Available: http://www.
jftc.go.jp/en/legislation_gls/imonopoly_guidelines.files/070928_IP_Guideline.pdf; Commission Regulation (EU) No 316/2014 of 21
March 2014 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of technology
transfer agreements [Online], Available: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.L_.2014.093.01.0017.01.
ENG; EC (2014) Guidelines on the application of Article 101 of the Treaty on the Functioning of the European Union to technology
transfer agreements [Online], Available: http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:C:2014:089:FULL&from=EN
Understanding patents, competition and standardization in an interconnected world
46
Part II – General concepts of patent law and competition law
or license additional non-protected products, services or technologies as a condition of licensing the
market-dominant intellectual property. This could be the case in situations described as ‘tying’, i.e.
making the purchase of a product or service a mandatory addition to the purchase of another product
or service. In exceptional circumstances, a refusal to license IPR indispensable to others’ participation
in a market could constitute an abuse of a dominant position. A potential remedy in this scenario would
be a court decision that mandates the licensing of such IPR on terms consistent with the requirements
of competition law. This could arise if a refusal to license IPR prevents market entry by new products
or services for which there is consumer demand, and such practices could also be viewed as attempts
by IPR holders to limit production and output, in itself a severe violation of competition law. However,
before such behaviour can be considered anti-competitive it must meet a number of specific conditions
elaborated in case law.61
7.2
Anti-competitive conduct involving standard-essential patents
Standard-essential patents (SEPs) are patents that must be licensed in order to implement a given
technical standard. Unlike non-SEPs, by definition it is not possible to work around a SEP and still
implement the standard. As noted by competition authorities, owning a SEP may confer market power.62
SEPs are very relevant to ICT standardization in that many standards are based on technologies
protected by a wide range of patents. As SEPs are indispensable to the implementation of standards,
a third party wishing to develop standards-compliant products would have to negotiate licences to
any SEPs present. This requirement is a potential obstacle to deployment of a standard, given the
inherent monopoly rights conferred by patent law on owners of SEPs (granting them the ability to
exclude third parties from using the patented technologies, which would prevent their competitors
from implementing standards).
Widespread deployment of standards depends on the existence of mechanisms that offer all industry
participants, whether standards developers or implementers, an assurance that the patent-protected
technologies incorporated in a standard will be made available to all interested parties, and that SEP
owners cannot obtain an unfair competitive advantage as a result of having their patents included in
a standard. It has thus become an established practice for standards bodies to require that, when
contributing patented technologies to a standard’s development, patent owners commit to licensing
their SEPs to standards implementers on royalty-free or reasonable and non-discriminatory licensing
terms (so called ‘RAND’ terms).63 In this sense, RAND commitments incentivize the inclusion of
sophisticated patented technology in standards, while also working to ensure that standards remain
open to all industry participants, regardless of whether or not they are members of the corresponding
standards bodies.
61
These circumstances were further elaborated by the European Court of Justice in the Magill (Joined cases C-241/91 P and
C-242/91P, ECR [1995] I-0743]) and IMS (C‑418/01, IMS Health [2004] ECR I‑5039) and Microsoft (T-167/08) cases, and include the
following: (i) the refusal to license must relate to a product or service indispensable to the exercise of a particular activity on a
neighbouring market; (ii) the refusal to license must be of such a kind as to exclude any effective competition on that neighbouring
market; (iii) the refusal to license must prevent the appearance of a new product for which there is potential consumer demand;
and, (iv) the refusal to license must not be objectively justified.
62
While merely having a patent does not necessarily confer market power, the European Commission’s Directorate-General for
Competition has held that “[i]t suffices to stress that market power can be conferred by a single SEP” when the standard constitutes a
barrier to entry. See EC (2012) Case No. COMP/M.6381 Google/Motorola Mobility, Regulation (EC) No. 139/2004 Merger Procedure,
[Online], Available: http://ec.europa.eu/competition/mergers/cases/decisions/m6381_20120213_20310_2277480_EN.pdf .
63
The RAND commitment is further discussed in Part III.
Understanding patents, competition and standardization in an interconnected world
Part II – General concepts of patent law and competition law
47
In light of the importance of RAND commitments as safeguards to the implementation of a standard,
it follows that any acts or omissions by SEP owners that disregard such commitments could possibly
bear anti-competitive consequences.
More specifically, threats to competition might arise as a result of attempts by SEP owners to
circumvent RAND commitments in order to serve their strategic interests. Such strategies could entail
participants in the standards-development process deliberately failing to disclose their SEPs during
a standard’s development phase, or manipulating the process by “secretly” filing patent applications
for innovations covered by a nascent standard. These are sometimes referred to as ‘patent ambush’
strategies, and generally considered anti-competitive. If a standard incorporating hidden patents is
adopted, SEP owners having avoided RAND commitments could use non-declared SEPs to extract
excessive royalties from implementers (over and above those provided for by RAND), or even to prevent
certain third parties from implementing the standard. Practices of this kind undermine the openness
and accessibility of standards and distort competition by creating significant barriers to market entry.
To disclose or not to disclose?
In 1996, the US Federal Trade Commission filed an administrative complaint against Dell Computer
Corporation, alleging that it had unlawfully restricted competition by failing to disclose patents essential
to the VESA Local Bus standard (a computer bus carries information between the computer’s central
processing unit and the computer’s components and peripheral devices).
VESA (the SDO) had approved the standard, a Dell representative participating in the standard’s
development having assured the SDO that, to the best of their knowledge, the standard did not cover
any patents owned by Dell. Once the standard was approved and widely implemented in the market, Dell
announced that it owned an SEP on the standard (granted in 1991) and sought to enforce it aggressively.
The FTC noted that the specific SDO had adopted ‘affirmative disclosure requirements’ and that these
requirements had not been met by Dell’s representative whose failure to disclose allegedly was ‘not
inadvertent’. It also noted that the SDO would have implemented a ‘different, non-proprietary design,
had it been informed of the patent conflict’. The parties reached a settlement (Consent Decree), whereby
Dell was prevented from enforcing its patents against any third party wishing to implement the specific
standard.
Understanding patents, competition and standardization in an interconnected world
Part III – The interplay between patents and standards
49
Part III – The interplay between patents and standards
8.
The challenging relationship between patents and standards............................51
9.
The role of SDOs and their IPR policies..................................................................55
9.1 General overview..............................................................................................55
9.2 Principal types of IPR policies..........................................................................57
Participation-based IPR policies..................................................................57
Commitment-based IPR policies.................................................................58
9.3 The basic building blocks of commitment-based IPR policies........................58
Disclosure rules...........................................................................................58
Seeking licensing commitments.................................................................59
10. The growing tension between patents and standards ........................................60
11. Specific concerns and issues with patents in standards......................................64
11.1 The meaning of ‘reasonable’............................................................................65
Separating the value of the patented technology from the value of
standardization itself....................................................................................65
Royalty stacking and aggregate reasonable royalties.................................66
Royalty base.................................................................................................67
11.2 The meaning of ‘non-discriminatory’...............................................................68
11.3 Availability of injunctive relief for SEPs............................................................69
11.4 Transfer of ownership of SEPs.........................................................................70
11.5 Demands for reciprocity and/or cross-licensing with SEPs.............................70
11.6 SEPs and patent-assertion entities...................................................................71
12. Overview of governments and courts’ perspectives on SEPs..............................72
12.1 Governments’ perspectives.............................................................................72
12.2 Courts’ perspectives.........................................................................................72
12.3 The promise of alternative dispute resolution.................................................74
Understanding patents, competition and standardization in an interconnected world
50
Part III – The interplay between patents and standards
Introduction and objectives of Part III
The intersection of patent law, competition law and the standardization ecosystem results in the
collision of arguably very different concepts:
–– S
tandards are developed through the collaboration of technical experts, often representing
competing commercial interests, to address marketplace needs such as interoperability or
data exchange.
–– P
atent law grants innovators sole rights to benefit from their inventions for a limited period of
time, seeking to preserve incentive for companies to invest in the research and development
(R&D) that results in innovation by providing an assurance that such investment will yield fair
return.
–– C
ompetition law is designed to protect marketplace competition and is thus closely related to
patents and standards in that both instruments affect competition in a variety of ways.
Standards are viewed by many as “quasi-public” goods, and, in the ICT context, standards are
often not implementable without access to proprietary technology protected by patents. Targeting
a balance between the interests of IPR holders and standards implementers, most standards
bodies have established IPR or patent policies that provide a framework for the inclusion of
IPR-protected technology in standards, often mandated by standards’ encompassing the best
available technologies.
While there is broad agreement on the need for clear frameworks to govern the inclusion of
patents in standards, in order to balance the needs of IPR holders and standards implementers,
there are many different views as to how this balance should be achieved. Recent years have
witnessed noticeable growth in tensions and conflicts surrounding the incorporation of patented
technology in standards. The global ICT industry has played host to an upsurge of standardsrelated patent litigation, particularly among parties active in the mobile and tablet markets.
These so-called ‘patent wars’ have seen certain ICT industry players allege, among other things,
that holders of SEPs subject to RAND licensing commitments are seeking licensing terms
beyond those provided for by RAND-based IPR policies, pressuring standards implementers into
accepting those terms by leveraging injunctive relief (banning imports, sales and/or distribution
of standards-compliant products).
Standards’ incorporation of patented technology raises several other challenges, such as those
related to non-discriminatory access to SEPs, royalty stacking, or the effects of transfers of
patents on their associated licensing commitments.
Upon completion of Part III, the reader should have a good understanding of:
–– What exactly a standard-essential patent is;
–– H
ow RAND-based IPR policies aim to create and protect a fair balance between stakeholders’
varied interests; and
–– T
he nature of conflict between stakeholders, both from the perspectives of patent owners
and standards implementers.
Understanding patents, competition and standardization in an interconnected world
Part III – The interplay between patents and standards
8.
51
The challenging relationship between patents and standards
The complex relationship between patents and standards is the subject of heated debate worldwide.
Although the patent and standardization systems both aim to support and incentivize innovation and
technological progress, the intersection of these two mechanisms may give rise to various tensions
and conflicts. The standardization system is based on the assumption of commonalities, creating
an even playing field for competition by granting stakeholders equal access to innovative solutions.
Conversely, the patent system is based on the award of temporary monopolies borne of IPR holders’
ability to exclude others from implementing protected technologies. The contrasting principles of the
inclusivity of standards and exclusivity of IPR do not meet without complexity.
Standardization processes open to participation by all interested parties – such as those of formal
SDOs, quasi-formal SDOs and many forums and consortia – usually involve the cooperation of
numerous ICT market players, often with very different commercial interests and business models.
Open standardization processes intend to ensure that resulting standards reflect the needs of different
standards implementers, also creating an environment where a standard’s development can benefit
from the multifaceted expertise, knowledge and insight gained by assembling stakeholders that
represent a broad cross-section of the ICT industry.
In a typical standardization process, it is the participants that drive a standard’s development by
proposing the inclusion of what they deem to be the most appropriate methodologies, technologies
or technical solutions. The development of such methodologies, technologies or technical solutions is
often a complex, costly endeavour demanding investments in R&D that can span several years. Yet, for
a variety of reasons, many companies volunteer their patented innovations for inclusion in standards.
Standards can incorporate literally thousands of patents, and the associated difficulties have been
compounded by the fact that the development of standards sometimes anticipates the progression of
technology rather than following it.
A standard-essential patent (SEP) is one that is indispensable to the implementation of a standard. A
patent is considered standard-essential if the text of a standard is drafted in such a way that it becomes
impossible to implement the specifications of the standard without using the technology protected
by the patent. While there may be (and usually are) many patent-protected innovations able to add
value to standards-based products, these are not necessarily essential as per the above definition. For
instance, patented technology related to an integrated phone antenna might add to the functionality of
a standardized antenna, but such patents will not be considered standard-essential if the specifications
of the relevant standard do not require the use of this technology.
Most standards bodies have developed IPR policies that allow for companies’ patent-protected
innovations to be reflected in standards, provided that such intellectual property is made available to
all standards implementers under royalty-free or reasonable and non-discriminatory (RAND) terms and
conditions.
While the inclusion of patented technology in standards might have been an incidental matter in the
past, it is very common today.64 One explanation for this is that the inclusion of patented technology adds
to standards’ ability to improve ICT performance, cost-effectiveness, connectivity or interoperability.
Another is that patents have come to cover a larger portion of our society’s overall knowledge base. A
further, complementary explanation for the increase in SEPs is that they serve the strategic interests
64
The recently compiled Open Essential IPR Disclosure Database (OEIDD) of SEPs in thirteen large standards-setting entities shows
that there have already been over 45,000 patents disclosed as potentially essential.
Understanding patents, competition and standardization in an interconnected world
52
Part III – The interplay between patents and standards
of market players, which see considerable benefit to having their patented technologies selected as
part of a standard.
Companies owning SEPs benefit from new revenue-generating opportunities in that every implementer
of a standard is by definition infringing the associated SEPs unless they acquire licences to these SEPs
from their owners. SEP owners possess strong bargaining positions in cross-licensing deals that grant
them access to other patents. Companies also benefit from contributing patented technology to a
standard because the widespread adoption of that standard might signify a change in market direction
that suits a SEP owner’s strengths and expertise or existing products, platforms and clients, thereby
giving them a competitive advantage by virtue of their having less need than their competitors to
remodel their product offerings.
It should be noted that the distribution of SEPs is skewed in several ways. In terms of technology
areas, the lion’s share of SEPs are found in the field of telecommunications.
Figure 8-1 – Disclosed SEPs by technology class65
Technology area legend:
2"3$45"
-("
6 Trans
Less
than
'"#6789"
1%
/("
7 Energ
9 MTS
&":8$6;"
Less
than <".8=" Less
>"?#3"
than
/("
/("
!("
1%
1%
@AB$6"
!("
1 Tele
2 LAN
0"+1"
&("
!
3 IT
4 AV
-".#"
!/("
5 Secu
)"*+,"
)("
6 Trans
7 Energ
!"#$%$"
&'("
8 Ind
9 MTS
Other
65
Telecommunications via public
networks
LAN/PAN/BAN networks, wired and
wireless
Information technology and Internet
Audio/video systems, coding and
compression, broadcasting, home
systems, home entertainment
Security, identification, cryptography,
biometrics
Transport, logistics, aerospace,
intelligent transport systems (excl.
areas in the above categories)
Energy generation and distribution
and storage, fuel cells, power
electronics
Industrial equipment, manufacturing,
production
Measurement, testing, safety
standards, language standards
[A wide variety of topics that do not
fit into the above categories]
Calculations on the basis of the OEIDD database. See also Bekkers, R., Catalini, C., Martinelli, A., & Simcoe, T. (2012). Intellectual
Property Disclosure in Standards Development. NBER conference on Standards, Patents & Innovation, Tucson (AZ), January 20 and
21, 2012. Available: http://users.nber.org/~confer/2012/IPKE/Bekkers.pdf
Understanding patents, competition and standardization in an interconnected world
Part III – The interplay between patents and standards
53
The distribution of SEPs is also skewed in relation to standards, with only a small minority of standards
mandating the implementation of patented solutions. Looking only at the standards that incorporate
patents, just a handful of them include volumes of SEPs that far outweigh the average (see Table 8-1),
with a small set of around two dozen standards each covering over a hundred SEPs. These patentheavy standards include those for telecommunications (e.g. 3GPP’s GSM, W‑CDMA and LTE), wireless
LAN (e.g. IEEE’s 802.11 ‘Wi-Fi’ and 802.16 ‘WiMax’ series), and audio and video codecs (e.g. ITU-T
H.222/H.262 ‘MPEG-2’ and ITU-T H.264 ‘AVC’/‘MPEG-4’).
Table 8-1 – The 24 standards that have 100 or more patent statements66676869
Standard
Description
Total disclosure statements
(both specific patent
statements and blanket
declarations)*
ETSI grouping 3G
Standard for 3G mobile telecommunications,
a.k.a. UMTS, W‑CDMA and 3GPP 67
16007
ETSI grouping 2G
Standard for 2G mobile telecommunications,
a.k.a. GSM and DCS-1800 68
7458
ETSI project LTE
Standard for 4G mobile telecommunications
3876
ITU-T H.264 & ISO/
IEC JTC1 14496
Standard for video compression, aka MPEG-4 Part 10,
Advanced Video Coding. Developed as collaboration
between ISO/IEC JTC1 and ITU. Used in many devices
including Blu-ray players, game consoles, computer
software, etc.
1682
ISO/IEC JTC1
18000
Standard for RFID technologies
1107
IEEE 802.11
Standard for wireless Local Area Networks, popularly
known as ‘Wi-Fi’
449
ITU-T H.222 & ITU-T
H.626 & JTC1 ISO/IEC
13818 and
Standard for video compression, aka MPEG-2. Parts
1 and 2 of MPEG-2 were developed in collaboration
with ITU-T. Used in many devices including DVD
players, computer software, etc.
381
IEEE 802.16
Standard for wireless Metropolitan Area Networks.,
popularly known as ‘WiMax’
335
ETSI grouping DVB
Standard for digital television broadcast 69
270
ITU-T G.992
Standard for ADSL, for delivering internet services to
residential homes via telephone cables
229
66
Calculations on the basis of the OEIDD database. See also footnote 64.
67
This group includes the following ETSI projects: 3GPP, 3GPP / AMR-WB, 3GPP / AMR-WBYes, 3GPP / EMS, 3GPP Release 7, 3GPP
Release 99, HSPAYes, HSUPA, UMTS, UMTS / CDMA, UMTS FDD, UMTS Release 4, UMTS Release 5, UMTS Release 6, UMTS
Release 7, UMTS Release 8, UMTS Release 9, UMTS Release 99, WCDMA, SAE.
68
This group includes the following ETSI projects: DCS 1800, GPRS, GSM, GSM / AMR-NB, GSM / TDMA, GSM Release 6, GSM
Release 7, GSM Release 98, GSM Release 99, GERAN, GERAN Release 6, GERAN Release 7, GERAN Release 8, GERAN Release
98, GERAN Release 99.
69
This group includes the following ETSI projects: DVB, DVB-C2, DVB-H, DVB-S2, DVB-SH, DVB-T2.
Understanding patents, competition and standardization in an interconnected world
54
Part III – The interplay between patents and standards
Standard
Description
Total disclosure statements
(both specific patent
statements and blanket
declarations)*
ITU-R M.1225
Not a product standard in itself, but guidelines for
the various 3G mobile technologies were going to be
evaluated by ITU (the so-called process for IMT-2000)
204
ISO 25239
Standard for friction stir welding, a technique that is
applied in shipbuilding, aerospace, automotive and
railway sectors, among others
191
ETSI group BRAN
HIPERLAN/2
HIPERMAN
ETSI activities for Broadband Radio Access Networks
(BRAN), including HiperLan/2, HiperAccess, HiperMan
169
ISO/IEC JTC1
15938
Standard for multimedia content description, also
known as MPEG-7
167
IEEE 802.3
Wired LAN standard known as Ethernet
149
ETSI project TETRA
Standard for professional mobile radio applications
for policy, ambulance and fire brigade applications, as
well as commercial use
144
ITU-T G.729
Voice compression technology used in Voice over
Internet Protocol (VoIP) application, among others
132
TIA 136
Second generation (2G) mobile telecommunication
standard developed in the US, known as D-AMPS.
Now considered end-of-life and replaced by GSM or
3G technologies
124
ITU-T G.993
Standard for VDSL, for delivering internet services to
residential homes via telephone cables. Faster than
ADSL
117
OMA WAP
Wireless Application Protocol (WAP), for interactive
data services on mobile phones. Now considered
end-of-life
117
ITU-T M.1457
Again not a product standard in itself, but detailed
specifications of the terrestrial radio interfaces of
International Mobile Telecommunications-2000 (IMT2000)
113
ISO/IEC JTC1
14888
Techniques for digital signatures
111
IEEE 802.1
Standard for architecture, interworking, overall
network management and several other general
elements of LAN and MAN networks
105
ISO/IEC JTC1
11172
MPEG-1 is a standard for compression of video and
audio. Used for digital radio and video CD, but best
known for the MP3 audio format it introduced (which
is officially called MPEG-1 Part 3) 70
100
* Please note that blanket declarations are allowed in some of these bodies.
70
70
Later, an audio layer was introduced in MPEG-2 that provides backward compatibility with MPEG-1 Part 3. As such, the common
term ‘MP3’ typically refers to both MPEG-1 Part 3 (Audio Layer III) and MPEG-2 Part 3 (Audio Layer III).
Understanding patents, competition and standardization in an interconnected world
Part III – The interplay between patents and standards
9.
The role of SDOs and their IPR policies
9.1
General overview
In the light of the need to balance the competing interests of
SEP holders and standards implementers, and aiming to develop
standards that reflect the best available technical solutions,
SDOs have established rules (usually referred to as IPR policies or
patent policies) governing the inclusion of patents in standards.
These IPR policies generally require that patent holders disclose
their SEPs during a standard’s development and that they
make commitments to licensing such SEPs to all standards
implementers under reasonable and non-discriminatory
conditions.
Commitment-based IPR policies, detailed in section 9.2 below,
have become the most widely adopted approach to dealing
with the challenges associated with the interplay of patents and
standards, thereby providing the central mechanism through
which ICT standardization balances the interests of various
stakeholders.71
55
The quest for balance
“ A well-balanced IPR policy
is likely to attract all types of
stakeholders to the standardization
process. However, if the IPR policy
overly favours patent holders,
then the standard may not meet
users’ needs, and not be readily
implementable. Similarly, if the
IPR policy overly favours users,
then patent holders may decide
not to contribute their technology
to the standardization process ”
Malcolm Johnson, Director of ITU’s
Telecommunication Standardization
Bureau
The task of balancing the interests of various stakeholders is made more challenging by the cross-cutting
nature of ICT standardization, which increasingly needs to take the requirements of other industry
sectors and consumer interests into account. Maintaining a healthy standardization ecosystem, in
which standards continue to benefit the greater part of the global population, relies to a large extent
on SDOs’ ability to strike a balance between the interests of SEP owners and standards implementers.
SDOs thus pay close attention to the use and abuse of standards, SEPs and RAND commitments, since
they have a clear interest in preserving the purpose, integrity and effectiveness of the standardization
ecosystem. The establishment of a reliable IPR policy, with robust review mechanisms and safeguards
that limit abuse of the system, should be a key priority for any standards body.
The idea that the implementation of standards could require the use of patented technology was
formally elaborated as early as 1932, when a committee of the American National Standards Institute
(ANSI) made the recommendation: ‘That as a general proposition patented design or methods not be
incorporated in standards. However, each case should be considered on its own merits and if a patentee
be willing to grant such rights as will avoid monopolistic tendencies, favorable consideration to the
inclusion of such patented designs or methods in a standard might be given’.72 The recommendation
was adopted unanimously, marking what may have been the first instance of a standards body adopting
a formal IPR policy.
71
For instance, for both competition authorities and courts, any SEP licensing commitments made within SDOs usually play an
important role in deciding related outcomes.
72
ANSI Minutes of Meeting of Standards Council, Nov 30, 1932. Item 2564: Relation of Patented Designs or Methods to Standards.
Understanding patents, competition and standardization in an interconnected world
56
Part III – The interplay between patents and standards
However, it was not until the 1980s that the incorporation of patents in standards began to attract
wider attention, and this intensified scrutiny may have been in part the result of several conflicts rooted
in patents’ inclusion in standards:
–– In the early 1980s, IGR, an organization owned collectively by German TV manufacturers, was
the holder of a patent essential to Germany’s stereo television broadcast standard.73 IGR granted
patent licences to its members but refused to grant a similar licence to Finnish TV manufacturer
Solera, thereby blocking Solera’s entry into the German market for stereo televisions. The European
Commission initiated legal proceedings against IGR, which shortly after agreed to grant Solera a
licence under the same conditions as those allowed to its members.
–– The early 1990s also saw the first deployment of the European GSM standard for mobile
telecommunications. This standard would later become an unprecedented European technology
success, with billions of users worldwide. As a result of growing tension between US firm Motorola
and a number of European companies, Motorola refused to license its standard-essential GSM
patents to many implementers, selecting only a few large firms with which it agreed cross-licensing
deals. Although not uncommon for standards bodies at the time, the GSM standards-development
process had yet to adopt effective IPR policies and this is now considered one of the main reasons
for the lacklustre competition in GSM terminals and infrastructure observed over GSM standards’
first decade on the market.74
The need for IPR policies has become clearly apparent over the past three decades, and today almost
all established standards bodies have put in place reasonably sophisticated IPR policies. Emphasis on
the importance of such policies has in no way diminished, and many have been amended and updated
in recent years.75
As mentioned above, the aim of IPR policies is to ensure that all known owners of SEPs commit
to making such patents available to potential standards implementers, on either: 1) reasonable and
non-discriminatory (RAND) licensing terms,76 which do allow for royalty-bearing licences; or 2) royaltyfree (RF) terms, sometimes referred to as ‘RAND-RF’ or ‘RAND-zero’, which emphasize that, apart
from no royalties, the owner will not stipulate any other conditions incompatible with RAND (such as
restrictions as to the field of use, etc.).
A less common third approach is one in which the standards body calls for ‘non-assert’ commitments
(which may include specific terms and conditions), whereby SEP holders will not assert their patents
against any implementer using their technology in the context of a standard.
Table 9-1 shows the licensing commitments called for by the IPR policies of twelve standards bodies.
73
EC (1982) XIth Report on Competition Policy, Brussels: EC, 63-64.
74
For a detailed analysis, see Bekkers, R. (2001) Mobile Telecommunications Standards: GSM, UMTS, TETRA, and ERMES, Norwood,
MA: Artech House; and Bekkers, R., Duysters, G. and Verspagen, B. (2002) ‘Intellectual Property Rights, Strategic Technology
Agreements and Market Structure: The Case of GSM’, Research Policy, Vol. 31, no. 7, pp. 1141-1161.
75
See also Section 15.5 in Note 9.
76
The RAND abbreviation is used predominantly in the U.S., while the term FRAND is used more commonly in Europe. This seems
to be a matter of convention, though, and does not seem to reflect any difference in meaning or intent. See Contreras, J.L. (2011)
An Empirical Study of the Effects of Ex Ante Licensing Disclosure Policies on the Development of Voluntary Technical Standards,
Gaithersburg, MD: U.S. Department of Commerce, National Institute of Standards and Technology, NIST Standards Service Group.
Understanding patents, competition and standardization in an interconnected world
Part III – The interplay between patents and standards
57
Table 9-1 – Licensing or non-assertion modes explicitly specified by the policy77
ITU/
ISO/IEC
IEEE
ETSI
ANSI
IETF
OASIS
VITA
F/RAND (may be
royalty-bearing)
Yes
Yes
Yes
Yes
(Yes) a
Yes
Yes
RF, F/RAND-RF, or
F/RAND on other
restricted terms as
specified by the policy
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Non-assertion
a)
Yes
W3C
HDMI
Forum
Yes
Yes
Yes
NFC
Forum
Yes
Yes
Although royalty-bearing F/RAND is formally an option in the IETF IPR policy, it is uncommon for working groups of this body to
agree on standards which include patented technology that is not available on RF terms.
9.2
Principal types of IPR policies
Standards bodies will adopt the IPR policy that best serves their objectives, and these objectives will
in some cases be made explicit by the IPR policy in question. The choice of an IPR policy is often the
result of consensus agreements reached among a standards body’s members, and such choices will
therefore be impacted by a body’s established culture and specific technical context, as well as the
composition of members with the right to vote or otherwise influence its decision-making processes.
Generally speaking, there are two principal types of IPR policy in terms of how such a policy attempts
to ensure the availability of licences on reasonable and non-discriminatory conditions: participationbased IPR policies, and commitment-based IPR policies.
Participation-based IPR policies78
Participation-based IPR policies require that, as a condition of membership or participation, companies
joining a standards body submit to licensing any eventual SEPs on specified terms or under a RAND
or RF licensing commitment. In other words, members are ‘automatically’ committed to licensing their
SEPs on RAND or RF terms, usually just for those standards being developed in a technical committee
where the member is participating. To prevent such obligations being ‘misused’ by fellow members
to gain access to the IPR ‘diamonds’ of other members, such policies sometimes include provisions
that allow member companies to opt out of their SEP licensing commitments should they object to
a standard covering technologies that they do not wish to share with others. Such opt-out provisions
could specify, for instance, that SEP owners may notify the standards body of the non-availability
of RAND or RAND‑RF licences within 30 days of a draft standard being published (sometimes also
requiring that the SEP owner then step back from the working group developing the standard in
question). However, companies are not usually permitted to opt out if the SEP covers a technical
77
Based on Bekkers and Updegrove (2012), op cit.
78
Examples include W3C or OASIS
Understanding patents, competition and standardization in an interconnected world
58
Part III – The interplay between patents and standards
contribution that they themselves submitted to a standards body. Participation-based IPR policies may
have disclosure rules, but often do not.
Participation-based IPR policies are more common in smaller, more informal standards bodies such
as consortia that focus on relatively narrow technological areas in which members or participants are
confident of their ability to honour such binding SEP licensing commitments.
Commitment-based IPR policies79
Commitment-based IPR policies are designed to identify patents essential to a draft standard, in most
cases through a disclosure policy which defines disclosure obligations related to SEPs owned by
participants. When a potential SEP is identified, the SEP owner is requested to submit a licensing
commitment. Certain standards bodies are satisfied with RAND commitments, while others seek RF
commitments. Providing for rare cases in which SEP owners refuse to make a licensing commitment,
an IPR policy will often specify that parties involved in the development of a standard should seek
alternative solutions not using the patented technology, or that work on the standard should be
withdrawn entirely if alternative solutions are not feasible.
Commitment-based IPR policies are more common in larger standards bodies. Large bodies will
often comprise tens of working groups, making it difficult for members or participants to follow all
the standards being developed at any given time, which would discourage them from submitting to
participation-based IPR policies that could result their being bound to SEP licensing obligations in a
wide range of technology fields. That said, very often the commitment only applies to those standards
emanating from specific technical committees where the member or participant has participated in the
standardization process.
Both participation-based and commitment-based IPR policies share the same ultimate goal: to ensure
that all known SEP owners commit to licensing their SEPs on reasonable and non-discriminatory terms.
This is usually the limit of a standards body’s involvement. Any negotiations are left to the parties and
generally are to take place outside of the standard body. If the parties cannot come to an agreement,
they may resort to a court to adjudicate their dispute. Standards bodies thus do not play a role in the
enforcement of the RAND or RF licensing commitments made in relation to SEPs covered by their
standards. Nor do they take a position as to whether declared SEPs are in fact essential, valid, and
enforceable.
9.3
The basic building blocks of commitment-based IPR policies
Commitment-based IPR policies, dominant in large SDOs, comprise two main ‘building blocks’:
disclosure rules, and seeking licensing commitments.
Disclosure rules
Disclosure rules specify the conditions under which members or participants are required to inform
the standards body of the existence of patents they believe are essential to a standard, or that may
become essential to a standard when its final text is approved.
79
Examples include ITU, ISO/IEC and ETSI.
Understanding patents, competition and standardization in an interconnected world
Part III – The interplay between patents and standards
59
Disclosure is important for at least three different reasons:
–– It can serve to ‘trigger’ requests to SEP holders that they make SEP licensing commitment.
–– It ensures that an expert group drafting a standard can make informed decisions regarding the
inclusion of patented technologies, judging each case on its own merits.
–– I t also yields information of relevance to prospective standards implementers in that SEP disclosures
indicate which companies may have SEPs (as some SEP owners typically will seek RAND licenses
and others will not, as they may generally use their SEPs for defensive purposes only). This
information may be of value in assessing what would be a ‘reasonable’ SEP licensing fee to target
in their negotiations with SEP owners.
Standards bodies’ disclosure rules vary considerably, in line with different approaches to issues such
as:
–– The exact situations triggering disclosure obligations.
Individuals participating in a standard’s development are often required to disclose the existence of
any SEPs of which they have knowledge, regardless of whether or not the owners of those SEPs are
participating in a standard’s development (i.e. members of a standards body not participating in the
development of a particular standard are in principle not subject to disclosure obligations in relation
to that standard). Given the difficulties associated with following all standards being developed in
a large standards body, such bodies’ IPR policies usually do not require participants in the specific
technical committee to perform patent searches.
–– Exactly what information needs to be provided in SEP disclosures.
–– At which point in the standards development process these disclosures should be made.
–– To whom the disclosed SEP information will be made available.
A detailed discussion of each of these points is beyond the scope of this publication. The interested
reader is referred to a recent study on this topic carried out for the US National Academy of Sciences.80
Seeking licensing commitments
The procedure for seeking SEP licensing commitments is one in which known holders of potential
SEPs are asked if they are willing to submit a public statement declaring that they will license their
SEPs on RAND or RF terms. These statements are known as ‘Licensing Statements’, ‘Undertakings’,
‘Letters of Assurance’ or ‘Declarations of Licensing Positions’. Requests for such commitments can be
made to members of a standards body or participants in a standard’s development process, as well as
to third parties if they are believed to own potential SEPs.
These two building blocks – disclosure rules and the seeking of licensing commitments – are often
combined into a single procedure using a predefined template or form that serves as both SEP disclosure
statement and SEP licensing commitment. However, it should be noted that SEP disclosures and SEP
licensing commitments remain conceptually distinct.
80
National Research Council (2013), Patent Challenges for Standard-Setting in the Global Economy: Lessons from Information and
Communication Technology. Washington, DC: The National Academies Press. Available: http://www.nap.edu/catalog.php?record_
id=18510
Understanding patents, competition and standardization in an interconnected world
60
Part III – The interplay between patents and standards
10.
The growing tension between patents and standards
Tensions relating to SEPs have become more apparent in recent years, as a result of several
developments in the ICT field.
Companies’ patent strategies have become more important parts of their business models, and the
number of patent applications continues to soar worldwide.
Companies have also adopted more aggressive patent litigation strategies. The probability of a patent
becoming the subject of a lawsuit within four years of its grant date almost tripled between 1986
and 1996.81 With large commercial interests at stake, companies employ the weapons that are most
effective in defending their market positions, and today these weapons are often patent portfolios.
A number of companies have also begun pioneering new business models not dependent on sales
revenues, instead relying entirely on income gained by granting licences to their patents.82 Such
strategies conducted in bad faith, or representing op portunistic behaviour, could be branded ‘patent
trolling’. As discussed above, patent trolling entails a company enforcing its patents against one or
more alleged infringers in an unduly aggressive manner, based on knowledge that the selected target
is already locked-in to the patent-protected technology and would therefore prefer to settle the dispute
out of court, paying the patent troll to avoid facing considerable litigation costs or the threat of having
to withdraw their products from the market.83
Another business strategy becoming more noticeable is that of ‘patent privateering’, where, for
instance, a company transfers its patents to a new firm tasked with aggressive litigation of competitors
in relation to patent infringements. In such strategies, the new firm often remains under the control of
the company having created it.84
Various developments specific to patents’ inclusion in standards have also fuelled the intensification
of SEP-related conflicts:
–– Standards are becoming more relevant and successful.
As shown in Part I, more and more products have come to rely on standards for their core functionality.
Network-based technologies and platforms are making their way into almost every industry sector
and aspect of social interaction, including healthcare, mobility and energy.
–– SEPs have become extremely valuable business assets.
SEPs bear substantial revenue-generating potential in that every implementer of a standard
requires licences to its SEPs, and SEPs have thus come to represent powerful bargaining chips
81
Bessen, J. and Meurer, M. J. (2008) Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk, Princeton, NJ:
Princeton University Press.
82
It should be noted that the decision to adopt a licensing-based business model can also be pro-competitive in that it permits
companies to focus on what they do best without the need to invest in the assets required to commercialize their creations in
products.
83
See Reitzig, M., Henkel, J. and Heath, C. (2007) ‘On sharks, trolls, and their patent prey - Unrealistic damage awards and firms’
strategies of “being infringed”’, Research Policy, Vol. 36, no. 1, pp. 134-154.
84
See Ewing, T. (2011) Introducing the patent privateers, Intellectual Asset Management magazine, January/February 2011.
Understanding patents, competition and standardization in an interconnected world
Part III – The interplay between patents and standards
61
when negotiating licences with other patent owners. However, in terms of SEP portfolios, the gap
between the ‘haves’ and ‘have-nots’ is widening.
–– The number of SEPs is increasing.
The number of disclosed SEPs is, on average, doubling every five years (Figure 10-1). As discussed
above, by 2012 companies had submitted over 45 000 SEP declarations. This figure could be a
gross underestimation given that it also includes ‘blanket declarations’ in which the exact number
of SEPs is not specified.
Figure 10-1 – Growth of SEP declarations over time85
Average
number
EP and US
patents
Cumulative
number of
declarations
5000
5
Num declarations
Num unique EP and US patents
4000
4
3000
3
2000
2
1000
1
0
1990
1995
2000
2005
2010
0
–– SEP-related litigation has become more prevalent than that related to other patents.
85
Litigation in relation to SEPs has become five times more common than that related to non-standardessential patents (see Figure 10-2). This perhaps reflects the higher perceived value of these patents,
or the fact that, by definition, every standards implementer infringes a standard’s SEPs.
In this graph, a declaration is defined as an event (at a specific date) that can either be a disclosure of one or more specific patents,
or a ‘blanket declaration’. Source: Bekkers, R., Catalini, C., Martinelli, A. and Simcoe, T. (2012) ‘Intellectual Property Disclosure
in Standards Development’, NBER Conference on Standards, Patents & Innovation, Tucson, AZ, 20-21 January 2012, [Online],
Available: http://users.nber.org/~confer/2012/IPKE/Bekkers.pdf.
Understanding patents, competition and standardization in an interconnected world
62
Part III – The interplay between patents and standards
Figure 10-2 – The probability of SEP-related litigation compared with
that related to non-standard-essential patents (‘baseline’)86
Cumulative
Litigation
Rate
0.15
Baseline
Declared Essential
0.10
0.05
0.00
0
5
10
15
20
Analysis
time
–– Impact on companies’ IPR litigation strategies resulting from the dynamism of the ICT market.
The mobile-telephony market serves as a good example. Nokia was once the uncrowned king of
mobile phones, but lost market leadership in dramatic fashion when the market’s focus evolved
from ‘feature phones’ to smartphones. New market entrants, such as Samsung and Apple, achieved
great success in a market already considered mature.
Alcatel of France and Lucent Technologies of the US, two incumbent telecommunication giants,
were hard hit by increasing global competition and thus merged to become Alcatel-Lucent.
Canadian telco Nortel became insolvent, while former giant Motorola split itself up and sold its
mobile-telephony business to Google.
In less than a decade, Huawei of China escaped from relative obscurity to grow into the world’s
largest mobile infrastructure manufacturer, overtaking Ericsson in 2012.87
–– Increasing prevalence of SEP ownership transfers:
Given the value of SEPs to their owners, there is strong demand to buy such patents. There are also
various reasons why companies may be willing to sell SEPs.
86
Figure plots the 20-year cumulative litigation hazard, using the Nelson-Aalen cumulative hazard function. Source: Simcoe, T. (2012)
‘Some Economics of Standard Essential Patents’, Keynote talk at the European Policy for Intellectual Property (EPIP) Conference,
Leuven, Belgium, 27 September 2012.
87
‘Who’s afraid of Huawei?’, The Economist, 4 August 2012.
Understanding patents, competition and standardization in an interconnected world
Part III – The interplay between patents and standards
63
Companies that become insolvent will put their entire SEP portfolio up for sale, and companies
enduring financial hardship might be willing to sell parts of their SEP portfolio. Given that companies’
business models evolve to prioritize new business strategies, SEP sellers’ losses in terms of the
overall value of their SEP portfolios are often lower than the value of the SEPs sold to their new
owners.
The box below provides a list of transactions likely to have involved transfers of SEP ownership. This
list is based on deals reported in the press and should not be considered exhaustive. It is difficult to
find complete, reliable information on such SEP transfers because, in most countries, patent holders
are not required to report patent ownership changes. This difficulty is compounded by the fact that
many standards bodies permit blanket SEP declarations, making it almost impossible to determine
exactly which of the declared patents are essential (although typically blanket disclosures mean that
more SEPs are included under the RAND licensing commitment).
Examples of recent transactions involving large patent portfolios
2011: Motorola sells its Motorola Mobility division to Google including a large patent portfolio valued
at approx. USD 5.5 billion
2011: Nokia sells ‘2 000+ patents’ to Mosaid
2011: Nortel Networks sells ‘6 000 patents and patent applications’ to a consortium including Apple,
EMC, Ericsson, Microsoft, Research In Motion and Sony, for a total of USD 4.5 billion
2012: Interdigital sells 1 700 patents specifically related to 3G, LTE and 802.11 technologies to Intel for
USD 375 million
2012: Adaptix was sold to Acacia, along with its portfolio of what were believed to be LTE ‘essential’
patents
2012: Eastman Kodak sells its imaging patents portfolio to a consortium led by Intellectual Ventures
and RPX Corp for USD 525 million
2012: IPWireless sells ‘500 patents including essential concepts in LTE, LTE-Advanced and 3G/4G
technologies’ to Intellectual Ventures and NVIDIA
2012: Nokia sells ‘450 patents including 300 SEPs’ to Sisvel
2012: Nokia sells ‘500 patents’ to Vringo
2013: Ericsson sells ‘2 185 US and international patents and patents pending’ to Unwired Planet
(formerly Openwave).
Understanding patents, competition and standardization in an interconnected world
64
11.
Part III – The interplay between patents and standards
Specific concerns and issues with patents in standards
Few issues receive more attention in the ongoing debates concerning SDOs’ IPR policies than the
meaning of the RAND commitment. Identifying the appropriate royalty and licensing terms for RANDdeclared SEPs, and understanding how the RAND commitment limits the relief available to the patentee
for infringement of SEPs, are important aspects of the ‘quest for balance’ that IPR policies seek to
strike between, on the one hand, the goals of fostering competition and widespread adoption of the
standard and, on the other, the desire to reasonably reward innovation and technical contributions to
standards development.
Because most SDOs’ IPR policies do not explicitly define specific parameters or requirements for
RAND licensing, debates regarding the meaning of the RAND commitment can arise in private licensing
negotiations as well as in litigation between parties that cannot agree on RAND licensing terms
for their SEPs. More recently, competition agencies in the US and EU have offered input, and SDO
members have debated whether and how SDOs might revise existing IPR policies to clarify or codify
RAND licensing principles. This section addresses six significant issues raised in these negotiations,
litigations and policy debates, and summarizes the concerns and views that have been offered in
relation to each.
Many of the positions identified in this section arise from concerns relating to patent ‘hold-up’, i.e.
abuse by the patent holder of its position after a standard has been completed. In addressing these
concerns, an SDO that has adopted RAND policies needs to be careful not to restrict a patent holder’s
ability to obtain, in good faith, reasonable compensation for use of its technology in the standard.
The patent hold-up concern arises because many practitioners of the standard (that is, potential
licensees in SEP licensing negotiations) have invested substantial resources in developing and
marketing products that comply with a given standard, to the point where it would not be economically
feasible, and not good for promulgation of the standard, for that company to shift to non-compliant
products or to withdraw from the market altogether. Because a SEP by definition cannot be worked
around, it can obtain market power if there is a marketplace demand for products to conform to
the standard in question. Once companies have made such investments, they can become ‘locked
into’ a standard for all practical purposes, and can be vulnerable to efforts by a given SEP holder to
extract exorbitant royalties far in excess of the value of the underlying patented technology. Thus,
without some constraint on the SEP holder’s ability to maximize royalties for SEP licensing, a locked-in
manufacturer may become compelled to pay grossly excessive, non-RAND royalties rather than risk
an injunction that would render it unable to market standard-compliant products, and then pass these
extra costs onto consumers. In fact, many commentators argue that those hold-up situations raise
competition law concerns and preventing hold-up is a primary purpose of the RAND commitment, and
that the scope of the RAND commitment should be interpreted accordingly.88
On the other hand, many SEP holders have invested significantly in research and development for
standardized technology, and the RAND commitment allows for ‘reasonable’ compensation for the
SEP holder. Some SEP holders have raised concerns that policies limiting a SEP holder’s rights when
enforcing SEPs (such as limitations on the right to seek injunctions for infringement), or policies limiting
88
Farrell, Joseph et al. (2007), ‘Standard Setting, Patents, and Hold-up,’ 74 Antitrust L. J. 603 (discussing SEP hold-up); Broadcom v.
Qualcomm, 501 F.3d 297, 313-14 (3d Cir. 2007) (‘When a patented technology is incorporated in a standard, adoption of the standard
eliminates alternatives to the patented technology. Although a patent confers a lawful monopoly over the claimed invention its
value is limited when alternative technologies exist. That value becomes significantly enhanced, however, after the patent is
incorporated in a standard. Firms may become locked in to a standard requiring the use of a competitor's patented technology.
The patent holder's IPRs, if unconstrained, may permit it to demand supracompetitive royalties. It is in such circumstances that
measures such as FRAND commitments become important safeguards against monopoly power.’) (internal citations omitted).
Understanding patents, competition and standardization in an interconnected world
Part III – The interplay between patents and standards
65
the royalties SEPs may earn, can incentivize potential licensees to become unreasonably aggressive
in licensing negotiations and to ‘hold out’ for royalties lower than what the patent holder should be
entitled to on a RAND basis. According to some, SDOs must be very careful to avoid diminishing an
SEP holder’s ability to obtain RAND compensation, and maintain reasonable incentives to innovate and
participate in standardization. The positions summarized below often involve some variant of these
basic themes.
11.1 The meaning of ‘reasonable’
What considerations, principles and guideposts should be provided to assist in the resolution of
disputes regarding ‘reasonable’ licensing terms?
The first prong of the RAND commitment requires an SEP holder to license SEPs on ‘reasonable’ terms
and conditions. Many believe that the reasonableness prong of the RAND commitment implies several
unique principles that should be considered in evaluating royalties for SEPs. It has been noted that
while in some circumstances such principles might limit the compensation obtained by an SEP holder,
the benefits of successful standardization – such as the widespread use of the standard and increased
market for such standardized products – can ensure reasonable compensation for a SEP holder even
though the per-product royalty may be relatively modest. Of course, views differ over the precise
contours of the patent holder’s obligation to license on ‘reasonable’ terms and conditions, or whether
SDOs should provide further guidance on this issue.
Specifically, to assist patent holders and potential licensees, some commentators and standards
participants have favoured the inclusion of additional guidance to companies (and potentially, to courts
or arbitrators) so that they will be better able to negotiate mutually acceptable licensing terms. These
commentators suggest the inclusion of various non-exclusive factors that should be considered in
addressing reasonable licensing terms. Other commentators have claimed that no further clarification
of ‘reasonable’ is necessary or desirable. These companies note that licensing terms should usually
be left to the parties to determine, and that providing more specific guidance in an SDO policy could
potentially risk involving the SDO in private business negotiations.
Three specific issues that have been subject to some debate are described below. Of course, these
factors are not exclusive, and there may be others that could be considered.
Separating the value of the patented technology from the value of standardization
itself
One of the most common arguments advanced regarding ‘reasonable’ compensation is that a
RAND royalty should be carefully tied to the value contributed by the specific patented technology
in comparison to other alternatives available to the SDO.89 For example, under this approach, if the
invention claimed in a particular SEP offers only minimal benefits over alternatives available to the SDO
before standardization, the RAND royalty should be minimal and no greater than the incremental value
offered by the standardized technology. Proponents of this principle argue that this royalty limitation
allows RAND negotiations and adjudications to simulate the outcome of the royalty negotiation that
would have taken place in a competitive environment (when the SDO and the potential licensee could
89
For example, some SDO participants believe IPR policies should include language suggesting that the value of the patent should
be assessed apart from any ‘hold-up’ or ‘lock-in’ effect associated with the patented technology being included in the standard
(e.g. ‘A patent holder is entitled to a reasonable royalty based on the value of its standard-essential patent(s) apart from any lock-in
resulting from the patent(s) being included in the standard.’).
Understanding patents, competition and standardization in an interconnected world
66
Part III – The interplay between patents and standards
still have chosen among other available alternatives). It is argued that this approach to RAND valuation
can minimize the risk that SEP holders will obtain royalties based on the post-standardization ‘holdup’ leverage created when companies are obliged to use the SEP technology to comply with the
standard.90 At a minimum, proponents of this view argue that ‘reasonable’ should be based on the
intrinsic value of the patent itself apart from its inclusion in the standard. Any value that inures to the
product because it implements the standard – the value of standardization – should be passed onto
users and consumers.
Opponents of this principle, however, argue ignoring the value created by the standard as a whole
would under-compensate patent holders thereby discouraging them from investing in research and
development. For example, it is claimed that if a feature within a standard allows the implementer to
earn significant additional profit from consumers, the inventor of that technology should receive its fair
share of those profits even if there were several equally valuable options available to the SDO at the
time of standardization.
Debate regarding this issue has been spirited, and different SDOs may elect to take different approaches.
Royalty stacking and aggregate reasonable royalties
Many technical standards, particularly in the ICT environment, include hundreds if not thousands of
patented technologies. There is a school of thought that RAND royalties must be reasonable in the
aggregate—that is, the sum of royalties collected for all SEPs covering a given standard should not be
so high as to remove the incentives to make and sell products using the standard, or, where such costs
are passed on to the customers, to undermine the desirability of and market for standardized endproducts.91 For example, if profit margins in a particular industry are 10 per cent, and the total royalty
burden is 15 per cent, then manufacturers may face a Hobson’s choice between selling products at
a net loss or raising prices to the point where consumers will no longer purchase the standardized
product.
Some argue, on the other hand, that unless and until the licensee shows that the aggregate royalty
burden on a standard is actually affecting market adoption of the standard or distorting competition
among manufacturers of standard-compliant products, the issue is only theoretical and should not act
to reduce a royalty to which the SEP holder is otherwise entitled. It may be noted, for example, that
many SEP holders do not seek royalties at all, and that the precise number of SEPs for many of the
major standards is very difficult to ascertain.
Others, however, maintain that royalty stacking should always play a role in setting a RAND rate for a
given SEP or subset of SEPs. These market participants argue that royalty stacking must be considered
both retrospectively and prospectively because, unless each SEP royalty is calibrated in the light of
90
See Microsoft Corp. v. Motorola, Inc., US District Court, WD Washington, Findings of Fact And Conclusions of Law, 25 April,
2013, §74 (United States District Court, Western District of Washington) (‘[A] RAND commitment should be interpreted to limit a
patent holder to a reasonable royalty on the economic value of its patented technology itself, apart from the value associated with
incorporation of the patented technology into the standard.’); Apple v. Motorola, Opinion and Order, 22 June, 2012, p. 18) (United
States District Court, Northern District of Illinois) (‘The purpose of the FRAND requirements … is to confine the patentee’s royalty
demand to the value conferred by the patent itself as distinct from the additional value – the hold-up value – conferred by the
patent’s being designated as standard-essential.’).
91
Some have argued that problem of patent hold-up can be exacerbated where hundreds or thousands of patents may be essential to
a single standard. See Brief of Amicus Curiae Federal Trade Commission Supporting Neither Party, Apple Inc. v. Motorola, Inc., Fed.
Cir. Nos. 2012-1548, -1549 (4 December, 2012), p. 13, Nos. 11-12; see also Microsoft Corp. v. Motorola, Inc., No. C10-1823, 2013
WL 2111217, *12, §72; id. *86, §539 (‘The anti-stacking principle constrains RAND because parties in a RAND negotiation would
determine a reasonable royalty by considering how much in total license fees the implementer can pay before implementation of
the standard becomes cost-prohibitive.’).
Understanding patents, competition and standardization in an interconnected world
Part III – The interplay between patents and standards
67
some reasonable overall SEP royalty cap, other SEP holders will demand royalties commensurate with
the SEP royalties already set.92 This phenomenon could result in one of two undesirable outcomes: an
oppressively large royalty stack develops and hinders competition and use of the standard; or a royalty
cap could be applied later and may deny future licensers a reasonable royalty, decreasing innovation
incentives.93
Resolving these issues remains the subject of much debate in the courts, agencies and various SDOs.
Royalty base
Many believe that when assessing the reasonableness of a SEP royalty demand, or the reasonableness
of the aggregate SEP royalty stack, negotiations should focus on the component that substantially
incorporates the functionality covered by the patent. In some forums this has been referred to as the
‘smallest saleable patent practising unit’.94 The choice of royalty base can often be significant where,
such as in the case of computers, the components that practise the standard can sell for a small
fraction of the price of the downstream product.
Proponents of application of the smallest saleable patent practising unit rule to RAND royalties argue
that using larger royalty bases enables SEP holders improperly to tax profits earned on non-infringing
components within the larger device. Some patent owners, they argue, seek to recover hold-up
royalties by disguising them as a small percentage of a high-priced ‘end-user’ device.95
Others strenuously oppose using the component as the relevant royalty base for a reasonable royalty
assessment. They may argue, for example, that the technology within the component adds value to
other components within the device (e.g. faster Internet access might be claimed to increase the
value of gaming software). In certain cases, those resisting application of the smallest saleable patent
practising unit rule argue that the price of the relevant component is commoditized and may not
reflect the true value of the technology included. Accordingly, it is argued that the value of the accused
technology is better reflected as part of the consumer price of the end-user device, regardless of
whether the patent purports to have invented such other aspects of the device.
92
See Microsoft Corp. v. Motorola, Inc., 2013 WL 2111217, at §72 (‘[A] proper methodology for determining a RAND royalty should
address the risk of royalty stacking by considering the aggregate royalties that would apply if other SEP holders made royalty
demands of the implementer.’)
93
Accordingly, some SDO participants believe IPR policies should include language indicating that ‘royalty stacking’ should be
considered – e.g. ‘The value of the standard-essential patent shall be assessed in the light of whether the aggregate royalties that
would apply if other owners of patents essential to the same standard demanded similar terms are consistent with the widespread
adoption of the standard.’
94
See LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 67 (Fed. Cir. 2012) (‘Thus, it is generally required that royalties
be based not on the entire product, but instead on the ‘smallest salable patent-practicing unit’.’); US Federal Trade Commission,
The Evolving IP Marketplace (March 2011), available at http://www.ftc.gov/news-events/events-calendar/2010/05/evolving-ipmarketplace, p. 212 (‘The practical difficulty of identifying a royalty rate that accurately reflects the invention’s contribution to a
much larger, complex product often counsels toward choosing the smallest priceable component that incorporates the inventive
feature.’); Cornell Univ. v. Hewlett–Packard Co., 609 F.Supp.2d 279, 288 (N.D.N.Y. 2009) (reducing damages awarded where counsel
improperly presented the jury with an inflated royalty revenue base of multi-component CPU bricks, servers, and workstations:
‘The logical and readily available alternative was the smallest salable infringing unit with close relation to the claimed inventionnamely the processor itself.’).
95
Accordingly, some SDO participants believe IPR policies should include language indicating that royalties should be assessed
based on the smallest saleable patent practising unit (e.g., ‘The value of the standard-essential patent should be assessed with
reference to the smallest saleable patent practising unit bearing the closest relationship to the portion of the invention claimed in
the patent that is essential to the standard, but should be further apportioned when the smallest saleable patent practising unit
contains functionality beyond that claimed in the patent.’).
Understanding patents, competition and standardization in an interconnected world
68
Part III – The interplay between patents and standards
11.2 The meaning of ‘non-discriminatory’
When, if ever, is it permissible to treat prospective licensees differently, such as by refusing to license
some types of standard implementers?
The non-discriminatory prong of the RAND commitment prohibits ‘discrimination’, but the scope of
such prohibition is another subject of debate. There are differing views, for example, about whether a
SEP holder’s obligation to license on ‘non-discriminatory’ terms permits the SEP holder to discriminate
against certain classes of licensees, including by refusing to license certain types of companies
altogether. In particular, some companies have taken the view that patent holders should have the
ability to select the appropriate level of the supply chain at which to license their intellectual property,
and to refuse licences to companies at other levels.
Under this view, for instance, a SEP holder might restrict SEP licences to ‘end-user’ product manufacturers
only, and not license directly the suppliers of the standard-practising components that are incorporated
into those products. Alternatively, the SEP holder might restrict SEP licences to component vendors
only, and refuse to license end-user product manufacturers. Or – as some SEP holders have recently
attempted – the SEP holder might even choose to license only consumers that utilize devices practising
the standard.96 Proponents of this view argue that such practices do not necessarily result in hold-up or
unfairness. Rather, it is maintained that an SEP holder can provide ‘access’ to the standard via licences
to one level of the supply chain so long as they do not seek to enjoin companies at other levels.
Many companies object to these types of selective licensing practices. First, they argue that companies
supplying all levels within the supply chain have contributed to the technical and commercial
development of the standard based on the expectation that they would be able to obtain RAND
licensing. Selective licensing of the type described above may serve as a disincentive to contribute
to and develop standardized technology. Secondly, opponents of this type of selective SEP licensing
argue that allowing an SEP holder to target downstream levels of the supply chain – i.e. end-user
products – and to avoid licensing component suppliers can be utilized to facilitate hold-up because SEP
holders may attempt to tax revenues from the sale of an integrated device rather than the less-costly
infringing component. For example, because end-user device manufacturers sell more expensive
products, those end-user manufacturers may be more vulnerable to higher damages awards if royalties
are adjudicated. Thirdly, it is stated that a company that practises a standard should not have to rely
on its suppliers or customers to negotiate and license SEPs, as that could constrain the scope of the
market for its goods (e.g. if an injunction is sought against the company’s customer) or its certainty
about ongoing supply (e.g. if an injunction is sought against the company’s supplier). In this sense,
a company that wants to pay a RAND rate for its own licence should be entitled to do so and thus
acquire the certainty that it will be free to purchase needed supplies and to market its products to
any customer without constraint. Fourthly, it is further argued that such licensing behaviour may also
trigger reciprocity conditions, further diminishing the availability of licences to essential patents (i.e. if
a particular company is denied a RAND licence, then it may have no obligation to offer RAND licences
in return).
Once again, these issues remain the subject of much debate.
96
Some SEP holders – mostly patent-assertion entities – have recently attempted this tactic, sending out thousands of licensing
letters and filing dozens of separate lawsuits against small businesses seeking direct payment for their use of standardized
consumer products.
Understanding patents, competition and standardization in an interconnected world
Part III – The interplay between patents and standards
69
11.3 Availability of injunctive relief for SEPs
When, if ever, is seeking or enforcing injunctions that would exclude products from the market for
infringement of RAND-declared SEPs consistent with the SEP holder’s RAND commitment?
National law provides generally applicable standards to determine when injunctive relief is an appropriate
remedy for patent infringement. Yet even where injunctions may otherwise be available under national
law, the availability of injunctive relief when enforcing RAND-declared SEPs has been contested in the
courts, in governmental agencies and among standards participants.
There is a broad spectrum of views on this subject. Some companies believe that the RAND
declaration is, fundamentally, an irrevocable commitment to license and therefore injunctions are never
appropriate for RAND-declared SEPs. Others believe that injunctions should be generally disfavoured
and permitted only when RAND royalties are proven to be unavailable—i.e. when the potential licensee
refuses to negotiate and is outside the jurisdiction of the appropriate courts, or when the implementer
is insolvent or otherwise refuses to pay a court-ordered RAND royalty. Still other parties believe that
injunction threats are necessary to provide incentives for negotiations and agreement and to prevent
misbehaviour and bad-faith delay by a potential licensee, and therefore that SEP injunctions should be
available in many circumstances to facilitate and incentivize negotiations.
Once again, the injunction debate arises in large part due to the competing concerns of hold-up by
abusive SEP owners, on the one hand, and protecting the legitimate ability of such SEP owners to
obtain RAND compensation, on the other. Those that prefer to limit the use of SEP injunctions argue that
injunction threats can be a form of anti-competitive hold-up because they force potential licensees into
the untenable position of accepting exorbitant royalty demands (or other non-RAND terms) or risking
having their products entirely excluded from the market. Given this dynamic, it is argued that even the
threat of an injunction during royalty negotiations can allow SEP holders to obtain unreasonably high
royalties. This can potentially affect the incentives to invest in making and selling the standardized
products, or to have excessive costs (in terms of higher royalties) passed on to users and consumers.
Those that favour preserving an SEP holder’s right to seek injunctive relief argue that it is a necessary
tool in order to obtain RAND royalties in the first place. If the only remedy available to an SEP holder
were a RAND royalty, they argue, potential licensees might not have sufficient incentive to agree on
such a royalty in advance of trial. They maintain that implementers could refuse to negotiate in good
faith and force SEP holders to litigate each patent claim in each relevant jurisdiction. In short, they
contend that if SEP injunctions are unduly limited, SEP royalties might become unreasonably low.
Various alternative proposals have been offered to reach compromise concerning whether and when
SEP injunctions could be appropriate. Some believe that so long as a party is willing to participate in
a binding process to determine RAND compensation, injunctions (and claims seeking injunctions)
should be off the table, as the mere threat of an injunction can potentially distort the parties’ bargaining
positions. Such proposals would prohibit a patent holder from seeking or enforcing an injunction against
a licensee that is willing to participate in such a process. By agreeing to participate in such a process,
it is said, the licensee may enter into a ‘safe harbour’ free from the threat or risk of injunctive relief.
There are different views about the proper scope of an adjudication process. Naturally, national laws
regarding patents (including royalties and compensation) will differ. Some have pointed out that a
licensee cannot be required to pay compensation for a patent that the licensee does not use (infringe),
or that is invalid or unenforceable. Others have noted that such determinations can take a long time,
and may be problematic in situations where the patent holder is asserting a large portfolio of patents
that all allegedly read on the standard at issue. Balancing these concerns can be difficult, as standard
Understanding patents, competition and standardization in an interconnected world
70
Part III – The interplay between patents and standards
users may reasonably wish to retain their substantive right to challenge patents before being required
to pay royalties (as they generally are entitled to do in connection with the assertion of any patents)97
– yet bad-faith, serial litigation of dozens or hundreds of patents could substantially delay a patent
holder’s efforts to obtain RAND compensation. Identifying the proper adjudication process in any given
circumstance may need to be left to the various national courts where the parties are unable to agree.
11.4 Transfer of ownership of SEPs
Should an SEP holder’s RAND licensing commitment be binding on those that later acquire the SEPs,
and how can SDOs best design their policies to ensure the RAND commitments bind successors-ininterest?
As discussed above, a RAND commitment may, at least in part, alleviate fears that patent hold-up will
undermine the use and development of an industry standard. Participants in standards bodies may
rely on RAND commitments when making decisions about what technologies to adopt as part of
a technical standard. Similarly, market participants may rely on RAND commitments when deciding
whether to commercialize standard-compliant products. Many standards participants have raised
concerns that RAND obligations, and the investment that is made in reliance on those commitments,
would be undermined if purchasers of RAND-committed patents are not obligated (by contract or
otherwise) to abide by the commitments undertaken by the RAND declarant. Indeed, some patentacquisition companies have taken the position that RAND is a contract to which they are not a party
and, therefore, are not bound.
Strong consensus has developed in various SDOs, however, that patent obligations should ‘run with
the patent’ when patent rights are assigned, and that RAND commitments should be construed as
encumbrances that bind all successors-in-interest to the RAND declarant. However, SDO participants
recognize that this interpretation may not apply in all jurisdictions. Accordingly, some SDOs include
provisions requiring members to apprise assignees of RAND commitments and to include appropriate
contractual requirements when transferring patents to ensure that, as to such transferred patent(s),
the licensing declaration is binding on the transferee and that the transferee will similarly include
appropriate provisions in the event of future transfers with the goal of binding all successors-in-interest.
11.5 Demands for reciprocity and/or cross-licensing with SEPs
What is the scope of ‘reciprocity’ conditions, and can a patent holder condition SEP licences on
demands for cross-licences to non-SEPs or other patents outside of the standard?
Many SDO IPR policies allow patent holders to condition their RAND commitment on ‘reciprocity’,
meaning that they are willing to license the covered SEPs on RAND terms so long as the licensee
reciprocates. While most acknowledge that conditioning RAND commitments on some measure
of reciprocity is permissible under IPR policies and competition law, parties may disagree on the
appropriate scope of reciprocity demands.
97
See Vringo v. ZTE, UK High Court of Justice (6/6/13) (‘I reject the idea that the stance being taken by [the potential licensee] in this
jurisdiction can fairly be said to mean that [the licensee] is not a willing licensee. [The licensee] has said it is willing to take a FRAND
licence on any patent found valid and infringed. In my judgment, a defendant accused of patent infringement by a patentee who
claims to have a standards essential patent is and must be entitled to say, ‘I wish to know if this patent is valid or infringed or not
before I take a licence.’ Such a stance cannot fairly be described as unwillingness.’)
Understanding patents, competition and standardization in an interconnected world
Part III – The interplay between patents and standards
71
In its narrowest form, reciprocity permits a RAND licence for SEPs to be conditioned on the licensee’s
agreement to cross-license SEPs covering the same standard(s) on RAND terms. Many find this type
of reciprocity reasonable based on notions of fairness: someone that makes their IPR available for a
RAND royalty ought to be able to practise that standard on RAND terms as well. Similarly, if a licensee
insists on practising a standard paying only RAND royalties, they should allow competitors to play on
a level playing field.
At the other extreme, many acknowledge that it can be improper to condition RAND royalties for SEPs
on the licensee’s willingness to cross-license non-SEPs (on RAND or any terms). A company’s nonSEPs can protect differentiating features and technologies that they seek to practise exclusively during
the term of the patent. While SEP holders ought to obtain a fair return on their investment, many believe
that they ought not to be able to leverage the hold-up power of an SEP to force competitors to license
differentiating technologies that would not otherwise be licensed. These sort of broad reciprocity
demands have been criticized by some competition agencies.98
Where the line should be drawn between these two extremes is another area of intense debate among
SDO participants. Some maintain that demanding cross-licensing of any patents other than SEPs for
the same standard is an improper use of SEPs. Others maintain that reciprocity can extend to SEPs
covering other standards promulgated by the same SDO or even other industry standards generally.
11.6 SEPs and patent-assertion entities
How might an SDO address ‘patent troll’ activities and the assertion of SEPs by entities that do not
participate in the standardization process or marketplace for standardized goods?99
Recent years have seen a rise in ‘patent-assertion entity’ (PAE) claims targeting products practising
technical standards. Standards-based assertions can be viewed as advantageous to the PAE because
they may be able to use publicly available materials to identify the alleged infringement and to bring
their allegations. (Conversely, non-standard claims may require reverse engineering efforts or other
investigations that are viewed as costly.)
Such use of patent rights can potentially upset the balance in a standards community, as PAEs –
because they do not make or sell products – can be immune from counter-assertions. This may
encourage overly-aggressive behaviour and litigation tactics, particularly if injunctions are available
that could exclude a standards-participant from the market.
As discussed above, standards bodies can use patent-transfer rules to limit the ability of PAEs to
purchase essential patents without becoming bound to the SDO’s licensing policy. Standards bodies
can also develop rules and requirements regarding injunctions and ‘reasonable’ compensation to limit
hold-up by PAEs. In addition, competition agencies and legislative bodies in some jurisdictions have
expressed interest in addressing concerns relating to PAEs.
98
See, for example the European Commission’s Decision regarding Google’s acquisition of Motorola Mobility (Case No.
COMP/M.6381): ‘Another concern would be that the SEP holder may force a holder of non-SEPs to cross-license those non-SEPs
to it in return for a license of the SEPs.’ Of course, parties may always voluntarily agree to license or cross-license SEPs and nonSEPs together. Rather, the reciprocity concerns described here arise where an SEP holder conditions a licence to its SEPs on a
cross-licence to the other company’s non-SEPs.
99
Once again, it should be noted that the decision to adopt a licensing-based business model can also be pro-competitive in that it
permits companies to focus on what they do best without the need to invest in the assets required to commercialize they create
in products
Understanding patents, competition and standardization in an interconnected world
72
Part III – The interplay between patents and standards
12. Overview of governments and courts’ perspectives on SEPs
12.1 Governments’ perspectives
The legality of seeking and enforcing injunctions against competitors on the basis of RAND-encumbered
SEPs has begun to attract considerable attention, in particular in the US and Europe.100
For instance, in its recent decision on the Google/Motorola Mobility merger,101 the European Commission
expressed concern that injunctions could be used in an anti-competitive manner to exclude competing
products from a market or to impose onerous licensing terms on potential licensees despite their
willingness to acquire SEP licences on RAND terms. More recently, the EC’s Directorate-General for
Competition closed its formal investigation into the behaviour of certain companies active in the mobile
industry suspected of SEP abuse.102
The potential abuse of RAND-encumbered SEPs has received similar attention in the US.
In July 2013, the US Federal Trade Commission (FTC) closed its investigation into the behaviour of
Google’s subsidiary Motorola only after Google agreed to a Consent Order that prohibits it from seeking
injunctions against licensees willing to follow a RAND determination process.103 The Google Consent
Order also covers the seeking of exclusion orders from the US International Trade Commission (ITC),
which has become a key forum in the US for disputes over the use of RAND-encumbered SEPs. The
increasing number of requests being made to the ITC for exclusion orders has prompted the FTC,104 the
US Department of Justice (DoJ) and the US Patent and Trademark Office (USPTO)105 to issue statements
urging the ITC to take into account the potential impacts of its decisions on competition (particularly
100
While the EU and the US have arguably been most active in this context, other States have also addressed some of the key areas
of dispute.
101
Case COMP/M.6381 Google/Motorola Mobility of 13 February 2012, paragraph 107. See also paragraph 126 which mentions that
“the seeking or enforcement of injunctions on the basis of SEPs is also not, of itself, anti-competitive. In particular, and depending
on the circumstances, it may be legitimate for the holder of SEPs to seek an injunction against a potential licensee which is not
willing to negotiate in good faith on FRAND terms”
102
In late 2012, the EC issued a Statement of Objections regarding Samsung’s abuse of SEPs. In response, Samsung retreated in
lawsuits it had instigated in Europe against standards implementers, conceding, among other things, its requests for preliminary
injunctive relief. In May 2013, in a preliminary conclusion of its investigation of Google, the Commission found that the company
had breached European competition law by seeking and enforcing an injunction against Apple. Both cases where closed in
April 2014, with the EC clarifying how EU competition rules apply on enforcement of SEPs. More specifically, the two decisions
affirm that recourse to injunctions is generally a legitimate remedy for patent infringements, but also clarify that the seeking of
injunctions may be abusive when two conditions are met: first, a SEP holder has given a commitment to license on RAND terms
in the context of standard development, and second, the potential licensee is willing to enter into a license on RAND terms. For
more information, please see speech by Joaquin Almunia, Introductory remarks on Motorola and Samsung decisions on standard
essential patents, Available: http://europa.eu/rapid/press-release_SPEECH-14-345_en.htm; EC Memo/14/322, Antitrust decisions
on standard essential patents (SEPs) - Motorola Mobility and Samsung Electronics - Frequently Asked Questions, Available: http://
europa.eu/rapid/press-release_MEMO-14-322_en.pdf; EC Press Release (IP/14/489), Antitrust: Commission finds that Motorola
Mobility infringed EU competition rules by misusing standard essential patents, Available: http://europa.eu/rapid/press-release_IP14-489_en.htm
103
Statement of the Department of Justice’s Antitrust Division on its Decision to Close its Investigations of Google Inc.’s Acquisition
of Motorola Mobility Holdings Inc. and the Acquisitions of Certain Patents by Apple Inc., Microsoft Corp. and Research in Motion
Ltd of 13 February 2012. See also FTC's final Decision and Order of 22 July 2013 in Motorola Mobility LLC and Google, Inc.
104
FTC, Third Party Statement on Public Interest filed on 6 June 2012 in ITC investigation No 337-TA-752: ‘[…] the threat of an exclusion
order could allow a patentee to obtain unreasonable licensing terms despite its RAND commitment’.
105
See DoJ and PTO, Joint Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments
of 8 January 2013: ‘[…] an exclusion order based on a F/RAND-encumbered patent appears to be incompatible with the terms of a
patent holder’s existing F/RAND licensing commitment to a [SSO].’
Understanding patents, competition and standardization in an interconnected world
Part III – The interplay between patents and standards
73
in relation to the standards-setting process) and not to grant exclusion orders against licensees willing
and able to acquire SEP licences on RAND terms.
12.2 Courts’ perspectives
One of the cornerstones of the concept of RAND licensing commitments is that parties can take legal
action if they believe that such commitments have been violated.
Opinion is divided on the implications of the considerable increase in the number of RAND-related
court cases seen in the last few years. Some argue that this signals a problem with the system itself.
Others argue that it demonstrates that the RAND system actually works, with parties able (and willing)
to go to court when RAND commitments are violated.
In a standards context, courts’ decisions affect not only the parties in conflict, but also the many
other stakeholders that use such cases as a basis for their understanding of what is and what is not
permitted, as well as where exactly the boundaries lie.
In April 2013, Judge Robart (US District Court) issued what is widely considered as the first judicial
determination of a worldwide RAND portfolio rate in Microsoft v Motorola,106 laying down economic
guideposts for the determination of a reasonable rate.
National courts in Europe have been required to make similar rulings,107 but as yet there has not been
any ruling determining a RAND rate.
The question as to whether, and under what circumstances, a patent holder should be allowed to seek
injunctive relief on the basis of a RAND-encumbered SEP has been answered differently by different
courts.
In the US, certain district courts have held that SEP holders making RAND licensing commitments
should generally not be entitled to injunctions, while others have concluded that a SEP holder does not
breach its contracts simply by requesting an injunction and exclusionary order in its patent-infringement
actions.
In Europe, national courts have applied a range of different legal tests in their grappling with the issue
of injunctive relief in a RAND context. In some EU Member States, such as the Netherlands, France
and UK, courts have generally held that granting an injunction may put a potential SEP licensee under
considerable pressure in their negotiation of the terms and conditions of a RAND licence, compelling
the licensee to agree to royalties exceeding a RAND level.108
106
Microsoft Corp. v. Motorola, Inc., No. 10-cv-1823 (W.D. Wash. April 25, 2013). Since that ruling, Judge Holderman of the District
Court for the Northern District of Illinois has also made a RAND determination, in a case for WiFi SEPs, in which he slightly modified
Judge Robart's approach to the specific situation of the case at hand; see Re Innovatio IP Ventures, LLC Patent Litigation, No. 11 C
9309 (N.D. Ill. October 3, 2013).
107
See, for instance, in the UK, Nokia v IPCom and IPCom v HTC [2013] EWHC 1178 (Pat); or Vringo v ZTE [2013] EWHC 1591 (where
Justice Birss refused to rule on a worldwide SEP portfolio licence as long as a potential licensee contests the validity/infringement
of the patents in suit); and in Germany, Motorola v Apple, District Court of Mannheim, Case No. 7 O 241/12 (Germany-wide licence
for all of Motorola's SEPs).
108
Samsung v. Apple, District Court of The Hague, 14 March, 2012, Case No. 400367/HA ZA 11-2212.
Understanding patents, competition and standardization in an interconnected world
74
Part III – The interplay between patents and standards
In contrast, German courts have addressed this issue from a perspective generally more favourable to
SEP holders.109 Both the application of the 2009 ‘Orange Book’ case-law by the country’s lower courts
and the characteristics of the German patent law system have made Germany the preferred jurisdiction
for seeking SEP-based injunctions in Europe.
12.3 The promise of alternative dispute resolution
SEP-related disputes can be (and are) brought before national courts, but courts can be ill-equipped to
consider the particulars of each dispute, given the complexity of the issues at hand and the consequent
need for specialized expertise. Protracted legal battles can also entail very significant costs, posing
barriers to litigation, especially for smaller players (which may also own SEPs). Moreover, differences
in legal jurisdictions affect the outcomes of court cases in different countries, which can encourage
a behaviour known as ‘forum shopping’ where the party initiating a court case (often the SEP owner)
selects a venue favouring their point of view.
In light of these concerns, ‘alternative dispute resolution’ (ADR) – such as mediation and arbitration –
has been highlighted as a promising means of resolving conflict in relation to SEPs.
ADR is a consensual procedure in which parties in conflict submit their dispute to one or more chosen
mediators or arbiters. The procedure results in a binding and final decision based on the parties’
respective rights and obligations, enforceable under the applicable ADR law. As a private alternative,
ADR normally forecloses court options (in other words, parties cannot turn to court to appeal the
arbiter’s ruling).
ADR may offer the following advantages in disputes surrounding patent and standards in the ICT
industry (depending on the design of the procedure):
Single procedure: ADR is able to use a single forum to settle disputes involving several jurisdictions,
allowing the parties involved to avoid the great expense and complexity of multi-jurisdictional litigation,
as well as the risk of inconsistent results.
Party autonomy: In contrast to litigation in court, the private nature of ADR allows parties greater
control over the manner in which their dispute is resolved. The parties select the mediator or arbiter
best suited to the task, a neutral party specialized in the subject matter of their dispute. The parties
also choose the place and language of the proceedings and the applicable law.
109
German Federal Supreme Court, judgment of 6 May 2009, Case No. KZR 39/06 - Orange Book Standard. According to this caselaw, a company that is sued for patent infringement and against which injunctive relief is sought can invoke a competition law
defence in those proceedings on the basis of the German civil law provisions on equity and good faith if the following conditions
are fulfilled (i) the company seeking a licence must have made an offer to the patent holder; (ii) that offer must be unconditional;
(iii) the patent holder may not reject that offer without infringing competition law; (iv) the company seeking a licence must adhere
to its offer; and (v) where the company seeking the licence is already making use of the patents in question, it must behave as if
the licensing agreement had been concluded and fulfil all the obligations resulting therefrom; in particular, it must pay the royalties
to the patent holder or into an escrow account. See also Philips v. SonyEricsson, District Court of Mannheim, 27 May, 2011, Case
No. 7 O 65/10); Motorola v. Apple, Court of Appeal in Karlsruhe, 27 February, 2012, Case No. 6 U 136/11); IPCom v. Nokia, District
Court of Mannheim, 18 February, 2011, Case No. 7 O 100/10; IPCom v. Nokia, District Court of Düsseldorf, 24 April, 2012, Case No.
4b O 273/10; and Motorola v. Microsoft, District Court of Mannheim, 2 May, 2012, Case No. 2 O 240/11.
Understanding patents, competition and standardization in an interconnected world
Part III – The interplay between patents and standards
75
Expertise: The parties appoint arbiters, mediators or experts with specific proficiency in the relevant
legal, technical or business area. This is particularly advantageous in IPR disputes rooted in the ICT
industry, where judges might lack the appropriate expertise.
Neutrality: ADR can be neutral to the law, language and institutional culture of the parties, preventing
any home advantage a party might enjoy in court-based litigation.
Cost and time efficiency: Rapid IPR dispute resolution is essential in the ICT industry where time delays
can jeopardize entire projects or product lines. ADR can resolve conflict in short time-frames which the
parties can adapt as necessary, often making use of fast-track methods such as ‘expedited arbitration’.
ADR also allows parties to avoid the very significant costs associated with multi-jurisdictional court
proceedings.
Confidentiality: ADR proceedings and their results are confidential, allowing parties in conflict to find
a solution amenable to both parties, without concern for its impact on public opinion or the views of
other industry players. This is particularly beneficial in cases where commercial reputations and trade
secrets are involved. (However, this might also be seen as a disadvantage in that other parties cannot
learn from the outcome or refer to it in future conflicts. There are also public interest benefits to the
transparency of judicial proceedings, particularly where a patent is subject to a successful invalidity
challenge that may be binding in future cases, or where a RAND royalty to a particular portfolio is
established).
Preserving long-term relationships: ADR mechanisms, mediation in particular, allow parties to preserve
their business relationships as less confrontational forums allow for business interests to be taken into
consideration in the interests of finding viable long-term solutions.
Finality and international enforceability of arbitral awards: Parties referring their disputes to arbitration
benefit from the finality of arbitral awards. Unlike court decisions, arbitral awards are normally final,
binding and not subject to appeal. In addition, the United Nations Convention on the Recognition and
Enforcement of Foreign Arbitral Awards of 1958 provides for the recognition of arbitral awards on a par
with domestic court judgments, without review of the merits of arbitral awards, which aids greatly in
facilitating the enforcement of awards across borders.
Discussion as to whether SDOs should incorporate support for ADR is gaining momentum. A number
of smaller standards bodies – such as the Digital Video Broadcasting Project (DVB Project), the Blu-Ray
Disc Association (BRDA) and the Open Mobile Alliance (OMA) – have already included ADR methods
in their IPR policies. Arguments for ADR were also lent further support by the FTC’s identifying ADR
as a means to facilitate RAND licensing agreements in the case of SEPs held by Google’s subsidiary
Motorola Mobility (although the implementer may also choose to go to a US District Court).110 Finally,
the Arbitration Center of the World Intellectual Property Organization (WIPO) has recently made
available tailored model submission agreements that parties may use to refer a dispute concerning the
adjudication of RAND terms to WIPO (Expedited) Arbitration. The WIPO model submission agreements
seek to ensure a cost and time-effective RAND adjudication.111
110
Motorola Mobility LLC and Google Inc., FTC File No. 121 0120 http://www.ftc.gov/opa/2013/07/google.shtm
111
http://www.wipo.int/amc/en/center/specific-sectors/ict/frand/
Understanding patents, competition and standardization in an interconnected world
76
Part III – The interplay between patents and standards
However, there are some concerns with any approach that would make ADR mandatory (as opposed to
a voluntary option). For instance, ADR, such as arbitration, typically is a voluntary process that requires
the specific parties to agree on the process, scope, etc. RAND adjudications typically involve issues
relating to the setting of RAND terms and conditions as well as issues relating to validity, infringement
and enforceability of a range of patents (and any other issues the parties wish to raise that relate to
their particular dispute). It may be difficult for the parties to agree on how all of these issues should be
addressed.
In addition, many questions remain as to how larger SDOs should incorporate ADR mechanisms.
These questions include, inter alia:
–– S
hould ADR activities be conducted by SDOs internally, or should they remain the responsibility of
external parties specialized in ADR?
–– W
hat is the appropriate scope of ADR procedures? Should they only determine RAND licensing
fees, or should they also address questions related to the validity and infringement of SEPs?
–– S
hould the use of ADR be mandatory (and for whom)? If so, how would such an obligation be
enforced?
–– W
hat are the principles to inform arbitrators’ rulings on RAND rates? Should (new) principles be
developed?
Understanding patents, competition and standardization in an interconnected world
Part IV – A closer look at ITU’s
Partstandardization
I – Standards and
activities
standards
and its
development
patent policy
77
Part IV – A closer look at ITU’s standardization activities and
its patent policy
13. ITU and its role in international standards development.....................................79
14. ITU-T standardization process ...............................................................................81
15. ITU-T/ITU-R/ISO/IEC Common Patent Policy and related Guidelines ...............83
15.1 History and evolution ......................................................................................83
15.2 Scope and key concepts .................................................................................83
15.3 Disclosure of SEPs ..........................................................................................84
To whom does the disclosure rule pertain?................................................85
Disclosure of another party’s patents.........................................................86
At what point in time should disclosure occur?..........................................86
Disclosure after approval of a standard......................................................86
How disclosures are made .........................................................................86
15.4 Licensing commitments for declared SEPs ....................................................88
Commitment to license on royalty free (RF) terms ....................................89
Commitment to license on RAND terms ....................................................89
No willingness to license ............................................................................89
A patent holder may not modify the Declaration Form...............................90
A patent holder may submit multiple Declaration Forms...........................90
A Declaration Form, once submitted, is irrevocable...................................90
The General Patent Statement and Licensing Declaration Form................90
Transfers and assignment of declared SEPs...............................................91
ITU’s Patent Information database..............................................................91
Conduct at meetings...................................................................................92
ITU will not interfere with negotiations nor settle disputes........................92
15.5 Recent steps aimed at improving the Common Patent Policy .......................92
Understanding patents, competition and standardization in an interconnected world
78
Part IV
I ––Standards
A closer look
and at
standards
ITU’s standardization
developmentactivities and its patent policy
Introduction and objectives of Part IV
ITU’s predecessor, the International Telegraph Union, was formed in 1865, making ITU one of
the first intergovernmental organizations ever established. Today, ITU has a global membership
of 193 Member States and over 700 private-sector entities, as well as academia and research
institutes. It is one of the primary SDOs in the ICT field, with over 4 000 international standards
(ITU Recommendations) currently in force. Some of ITU’s best known standards include those
underpinning long-haul fibre-optic transport (SDH, OTN); fibre- or copper-based access networks
through which end-users connect (xDSL, PON); and audiovisual coding (ITU-T H.323, ITU-T H.264,
ITU-T H.265), to name just a few.
ITU standards development is driven principally by private-sector members that come together to
develop the standards that the industry needs to progress. Standards work is initiated in response
to contributions from members, and decisions to take on new work or approve standards are
made by consensus. ITU’s standards-approval process allows for participation by members not
actively involved in the development of a standard, permitting all members to review proposed
standards and submit comments or concerns.
ITU, ISO and IEC have developed a common patent policy and related guidelines, adopted in
2007. The policy rests on a commitment-based approach. A disclosure process aims to identify
all patents essential to standards under development, and a commitment process seeks
declarations from SEP holders that they are willing to grant licences to these patents on certain
sought terms.
ITU generally receives between 50 and 150 statements a year indicating that a company (or other
organization) believes it owns patents indispensable to ITU Recommendations. Each of these
statements can list one or more individual patents (sometimes hundreds), and ITU also allows
blanket claims in which the exact identities of SEPs are not specified.
In relation to SEP licensing commitments, ITU allows for companies to commit to licensing their
SEP on either RAND or RF terms. Companies opting for RF terms do not waive all their rights
to royalties, and are still entitled to demand non-monetary conditions in licensing contracts,
provided that these conditions are not unreasonable or discriminatory. Companies opting for
RAND terms reserve the right to demand royalty-bearing licences, provided that such licensing
fees and all other terms and conditions are not unreasonable or discriminatory. Both RF and
RAND commitments allow for reciprocity requirements, within certain limits. A patent owner
can also declare that it is unwilling to grant licences to its SEPs, but such cases are fortunately
very rare.
Upon completion of Part IV, the reader should have a good understanding of:
–– Well-known ITU achievements in global ICT standardization;
–– Key principles and provisions of the ITU-T/ITU-R/ISO/IEC Common Patent Policy; and
–– T
he differences between the various options for licensing commitments, including reciprocity
clauses.
Understanding patents, competition and standardization in an interconnected world
Partstandardization
I – Standards and
standards
development
Part IV – A closer look at ITU’s
activities
and its
patent policy
13.
79
ITU and its role in international standards development
ITU has a long history, being a direct descendent of the International Telegraph Convention of 1865
and thus one of the world’s oldest intergovernmental organizations. Although the International Radio
Telegraph Convention was established separately in 1906, the two conventions were merged in
1932 and the resulting organization was subsequently renamed the International Telecommunication
Union (ITU) in 1934. Standards development has been one of ITU’s core activities since its inception,
but the organization differs from other standards bodies in one key respect, namely in that it is an
intergovernmental organization founded on a treaty between nation states.
ITU has a public-private partnership of members that includes 193 Member States and over 700 privatesector entities, as well as academia and research institutes. It has a federated structure in which a
General Secretariat supports membership-driven work undertaken in three specialized Sectors, each
of which is also supported by its own secretariat. The Radiocommunication Sector (ITU-R) allocates
global radio spectrum and satellite orbits, among other things; the Telecommunication Standardization
Sector (ITU-T) develops the technical standards that ensure networks and technologies seamlessly
interconnect; and the Telecommunication Development Sector (ITU-D) strives to improve access to
ICTs for underserved communities worldwide.
ITU-T is responsible for the majority of ITU’s standards work, although standards are also developed
by ITU-R. This publication focuses on the ITU-T standardization process and its resulting international
standards (‘ITU-T Recommendations’).
ITU-T Recommendations are developed within ITU-T study groups (Table 13-1), which assemble experts
from around the world to develop the standards the ICT industry needs to progress.
Table 13-1 – Overview of current ITU-T study groups
ITU-T Study Group
Topics and responsibilities
2 (Operational aspects)
International telecommunication numbering system; and the management of
telecom services, networks and equipment.
3 (Economic and policy
issues)
Principles for the harmonization of global interconnection rates, the costs between
telecommunication service providers when linking networks for the exchange of
traffic.
5 (Environment and climate
change)
ICT’s relationship with electromagnetic effects, the environment and climate
change.
9 (Broadband cable and TV)
Telecommunication systems in the distribution of television and sound
programmes; and cable and hybrid networks as integrated broadband networks.
11 (Protocols and test
specifications)
Signalling requirements and protocols; and test specifications focusing on global
interoperability testing.
12 (Performance, QoS and
QoE)
Models to evaluate performance, quality of service (QoS) and quality of experience
(QoE).
13 (Future networks
including cloud computing,
mobile and next-generation
networks)
Requirements and functional architectures of future networks including cloud
computing, mobile and next-generation networks.
Understanding patents, competition and standardization in an interconnected world
80
Part IV
I ––Standards
A closer look
and at
standards
ITU’s standardization
developmentactivities and its patent policy
ITU-T Study Group
Topics and responsibilities
15 (Transport, access and
home)
Optical transport networks; fibre- or copper-based access networks; smart grid; and
home networks connecting in-premises devices and interfacing with the outside
world.
16 (Multimedia)
Multimedia coding, terminals, systems and applications.
17 (Security)
Security, and technical languages and description techniques.
ITU-T Recommendations cover a wide range of ICT fields, but some of the best known are those
underpinning copper- or fibre-based access networks (xDSL and PONs), long-haul optical transport and
audiovisual coding. ITU-T Recommendations also govern international telecommunication numbering
systems, e.g. the assignment of fixed and mobile telephony numbers in any country being based on
Recommendation ITU-T E.164.
Optical transport and video coding standards
An estimated 95 per cent of international data traffic travels over undersea or terrestrial fibre-optic cables.
These are the information superhighways that connect networks across continents and countries.
Backbone optical transport networks carry traffic framed in standardized protocols that enable the
interoperability of ICT networks and devices built and operated by numerous entities in a vast array of
locations.
The ITU-standardized Optical Transport Network (OTN) provides a terabit-capable framework equipped
to carry ever-rising volumes of data and video traffic. OTN supports legacy protocols such as SDH, but it
is designed to transport new packet, data-centre and video protocols such as IP, MPLS, Ethernet, Fibre
Channel, SDI, DVB-ASI, etc. This allows for the seamless convergence of operators’ networks. OTN also
offers the flexibility required to support future protocols as they emerge.
Audiovisual media coding standards are essential in allowing consumers to enjoy high-quality content
received over telecommunication networks or stored on physical media (such as optical discs or flash
memory). An important part of this coding is the compression of data that would otherwise have been
much too large to transmit or store efficiently.
The ITU-T H.264 video compression codec, developed in collaboration with ISO/IEC JTC1, provided the
common platform that foments the extraordinary innovation and growth seen in the video market over
the last decade. It is widely used in modern Internet streaming services, as well as in physical storage
such as Blu-ray discs. ITU-T H.264 offered the first truly scalable solution, and its dominance is such that
many market players have adopted it to replace their own proprietary codecs.
ITU-T H.264 remains the most deployed video compression standard worldwide, now accounting for
over 80 per cent of web video, and it continues to deliver excellent quality across the entire bandwidth
spectrum – from high-definition television to videoconferencing and 3G mobile multimedia. ITU-T H.265, the successor to ITU-T H.264, was approved in April 2013 and will considerably ease the
burden on global networks where, by some estimates, video accounts for more than half of bandwidth
use. ITU-T H.265 needs only half the bit rate of its predecessor and will provide a flexible, reliable and
robust solution, future proofed to support the next decade of video.
Understanding patents, competition and standardization in an interconnected world
Partstandardization
I – Standards and
standards
development
Part IV – A closer look at ITU’s
activities
and its
patent policy
14.
81
ITU-T standardization process
ITU-T study groups are groups of experts volunteered by members to develop standards in a particular
technical field. Central to the ITU-T standardization process is the concept of a ‘contribution’, the term
used to describe a membership input to an ITU-T study group. The subject matter of contributions varies,
but typically they are limited to suggesting new work areas, new Recommendations and changes to
existing ITU-T Recommendations. The acceptance of a proposal in a contribution is dependent on that
proposal finding consensus among a study group’s participants.
Assisting in the organization of standardization work, a study group may be structured into a number
of ‘working parties’ overseeing particular groups of ‘questions’. Standardization work on a question is
carried out by a ‘rapporteur group’, a team of experts tasked with drafting ITU-T Recommendations to
meet a question’s agreed objectives, taking into account guidance from other study group participants
as well as from other relevant ITU expert groups.
Once the text of a draft ITU-T Recommendation is considered mature, it is submitted for review to a
meeting of the overarching study group or working party. If agreed by the meeting, it is given ‘consent’
– meaning that the study group or working party has given its consent that the text is sufficiently mature
to initiate a final review process leading to the approval of the ITU‑T Recommendation. After a text has
achieved consent (or is ‘determined’ in the case of standards that have regulatory implications), the
Director of ITU-T’s secretariat, the Telecommunication Standardization Bureau (TSB), announces the
start of the applicable approval process (either TAP or AAP, as described below) by posting the draft
text on the ITU-T website and calling for comments. This gives all members the opportunity to review
the text.
Draft ITU-T Recommendations that have regulatory implications are subjected to an approval process
termed the ‘traditional approval process’ (TAP). TAP contains a number of safeguards deemed
necessary in the context of these regulatory implications, and, as a result, this process takes some
time. However, the vast majority of ITU-T Recommendations are approved via the ‘alternative approval
process’ (AAP), a fast-track approval procedure developed in the interests of delivering standards
to market in the time-frame demanded by the ICT industry. This new procedure was introduced in
2001 when ITU-T conducted a major overhaul of its standards-development procedures, streamlining
approval procedures and yielding an estimated 80-90 per cent reduction in the time taken to approve
an ITU-T Recommendation.112
In both TAP and AAP, the ‘last call’ phase is a four-week period in which comments can be submitted
by Member States and Sector Members. If no comments other than editorial corrections are received,
the ITU‑T Recommendation is considered approved. However, if any comments identify issues in need
of further work, the study group chairman, in consultation with TSB, initiates a comment resolution
process involving the experts concerned. A revised text is then posted to ITU-T’s website for an
‘additional review’ period of three weeks. If no significant comments are received, the revised ITU-T
Recommendation will be approved. If received comments point to issues in need of further work, the
112
Until the mid-1990s, ITU standards required, on average, between two and four years to be approved and published, but can today
be approved in an average of two months or as little as five weeks through AAP.
Understanding patents, competition and standardization in an interconnected world
82
Part IV
I ––Standards
A closer look
and at
standards
ITU’s standardization
developmentactivities and its patent policy
draft text and all accompanying comments are sent to the next meeting of the relevant study group for
further discussion and possible approval.
In cases where comments are received during the last call but the study group chairman sees that there
is insufficient time for comment resolution and an additional review period, the draft Recommendation
and unresolved comments may be sent directly to the next meeting of the study group for resolution
and agreement.
Over the last decade, ITU approved between 183 and 326 new or revised ITU-T Recommendations
each year, as illustrated by Figure 14-1.
Figure 14-1 – New and revised ITU-T Recommendations approved, 2000-2013
New and revised ITU-T Recommendations approved per year since 2000
350
300
250
200
150
100
50
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120 2013
Understanding patents, competition and standardization in an interconnected world
Partstandardization
I – Standards and
standards
development
Part IV – A closer look at ITU’s
activities
and its
patent policy
15.
83
ITU-T/ITU-R/ISO/IEC Common Patent Policy and related
Guidelines113
Almost all SDOs have established policies governing the inclusion of patented technology in standards.
The ITU-T/ITU-R/ISO/IEC Common Patent Policy was adopted in 2007, and recent work has targeted the
development of measures to improve this policy.
15.1 History and evolution
ITU began discussing the issues associated with the inclusion of patented technology in its standards
in the early 1970s, but as technology and business strategies evolved, the number of SEPs and their
importance has grown in significance. The first version of an ITU patent policy was developed in 1985,
based largely on best practices established by certain ITU-T study groups. Later, during the 1990s, it
became apparent that the issues surrounding patents and standards were arising more frequently
and becoming even more complex. In response, the ITU Director of TSB’s Ad Hoc Group on IPR was
established as a forum for experts from the ITU membership and invited guests to provide input and
guidance on these issues.
Two other large, international SDOs – ISO and IEC – found themselves in a similar position and were
also evaluating their IPR policies. Against the backdrop of increasing ICT convergence, the three
organizations saw benefits to harmonizing their IPR policies and orchestrated this harmonization
through their World Standards Cooperation (WSC) initiative. After considerable discussion, WSC
announced in March 2007 that it had agreed a Common Patent Policy for ITU/ISO/IEC.114
The ITU-T/ITU-R/ISO/IEC Common Patent Policy allows for companies’ innovative technologies to be
included in standards as long as intellectual property is made available to all standards implementers
on RAND terms and conditions.
15.2 Scope and key concepts
The overriding objective of the ITU patent policy is ‘that a patent embodied fully or partly in a
Recommendation/deliverable must be accessible to everybody without undue constraints’.
IPR policies are usually either participation- or commitment-based. ITU’s policy, much like those of
other large SDOs, is commitment-based. The policy encourages the early disclosure and identification
of patents that might be essential to standards under development. As part of that disclosure, SEP
holders are asked to provide a statement regarding their willingness to license their SEPs to standards
implementers. The policy thus seeks to improve the efficiency of ITU standards development and
avoid conflict stemming from patent-rights disputes.
113
The comments made in this Section are based on the ITU-T/ITU-R/ISO/IEC Common Patent Policy and related Guidelines as they
stood at 31 March 2014. The opinions expressed herein are those of the authors and do not necessarily represent the views of the
ITU. Nothing in this Section is to be considered as an authoritative interpretation of the ITU-T/ITU-R/ISO/IEC Common Patent Policy
and related Guidelines as this publication is only intended for educational and informational purposes.
114
Although ITU, ISO and IEC share a common policy, parts of the policy are specific to each of the SDOs.
Understanding patents, competition and standardization in an interconnected world
84
Part IV
I ––Standards
A closer look
and at
standards
ITU’s standardization
developmentactivities and its patent policy
The harmonized ITU/ISO/IEC approach to the treatment of patents comprises:
–– Common Patent Policy for ITU-T/ITU-R/ISO/IEC (‘Patent Policy’).
–– Guidelines for Implementation of the Common Patent Policy for ITU-T/ITU-R/ISO/IEC (‘Guidelines’).
These guidelines are intended to clarify and facilitate implementation of the Patent Policy.
–– Patent Statement and Licensing Declaration Form (‘Declaration Form’).
While the Patent Policy has remained unchanged since its adoption in 2007, the Guidelines and various
declaration forms have been updated over time.
This publication focuses on the Patent Policy, but ITU has also adopted Software Copyright Guidelines
and Guidelines related to the inclusion of Marks which provide study groups with guidance in relation
to the incorporation in standards of material under copyright or trademarks, service marks and
certification marks.
The Patent Policy, in keeping with most commitment-based IPR policies, has two main building blocks:
disclosure rules, and licensing commitments. Disclosure refers to standardization participants’ alerting
ITU of the existence of any patents or pending patent applications that might lead to a standard
incorporating SEPs once approved. Licensing commitments are made in response to the request
that SEP holders provide ITU with a declaration of their willingness to license SEPs to all standards
implementers on RAND or RF terms. Such disclosures and licensing commitments are effected through
ITU’s Patent Statement and Licensing Declaration Form.
15.3 Disclosure of SEPs
The general disclosure rule in the Patent Policy reads: ‘[A]ny party participating in the work of ITU, ISO
or IEC should, from the outset, draw the attention of the Director of ITU-TSB, the Director of ITU-BR, or
the offices of the CEOs of ISO or IEC, respectively, to any known patent or to any known pending patent
application, either their own or of other organizations’. The Guidelines further explain that information
should be provided ‘in good faith and on a best-effort basis’ but there is no requirement that participating
patent holders conduct patent searches in order to make more definitive disclosures.
As disclosure is encouraged early in the standards-development process, before the text of a standard
matures, it is very possible that disclosed patents will not be essential to the final version of a standard.
This uncertainty is magnified by the possibility that disclosed patent applications will have their scope
narrowed during the patent prosecution process, resulting in the granted patent not being essential
to the standard. There is also the risk that the final version of a standard will differ substantially from
earlier versions, thereby covering patents or pending patent applications not initially considered
relevant to a standard under development. These limitations are the result of a trade-off made by the
Patent Policy: to seek disclosures late in the standards-development process might result in higher
‘quality’ disclosures, insofar as there will be a higher likelihood of disclosed patents actually being
standard-essential; however, at this stage, undesirable consequences can result from the discovery
that patented technology is not available on the sought RAND or RF terms.
ITU receives several dozen patent declarations each year in response to its disclosure rules, an
increasing number of which come from Asia (see Figure 15-1). When considering these numbers, it
is important to note that a single declaration can sometimes identify hundreds of patents believed
Understanding patents, competition and standardization in an interconnected world
Partstandardization
I – Standards and
standards
development
Part IV – A closer look at ITU’s
activities
and its
patent policy
85
to be essential to a standard under development. Moreover, as ITU allows parties to submit ‘blanket
declarations’, some declarations will not specify whether they relate to a single patent or to a large
patent portfolio.
Figure 15-1 – Number of patent declaration statements by regional origin, 2000‑2013
Patent Statements_2000-2013
150
140
130
120
110
Asia
Europe
North America
100
90
80
70
60
50
40
30
20
10
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120 2013
Note:
No patent declarations received from Africa, Australia or South America.
To whom does the disclosure rule pertain?
The disclosure rule pertains to any party participating in ITU standardization work. This encompasses
work undertaken in study groups and their subordinate groups or other expert groups of ITU-T and
ITU-R, as well in countries’ processes to determine national positions on draft ITU standards. Parties not
participating in ITU standardization work may also disclose potential SEPs, but are under no obligation
to do so.
Understanding patents, competition and standardization in an interconnected world
86
Part IV
I ––Standards
A closer look
and at
standards
ITU’s standardization
developmentactivities and its patent policy
Disclosure of another party’s patents
ITU’s SEP disclosure process does not confine itself to patents owned by companies making
disclosures. The Patent Policy also encourages disclosures of SEPs ‘of other organizations’. It is often
difficult for a company to assess whether other companies own potential SEPs, but such information
is very relevant to the work of ITU, especially if the identified SEP owner is not a participant in ITU
standardization work and is thus not itself subject to any disclosure obligations. If a ‘third party’ is
reported to own a potential SEP, ITU will ask the company in question if it agrees with the analysis that
its patent(s) might become standard-essential and whether it is willing to submit a Patent Statement
and Licensing Declaration Form. However, if the third-party company is not a participant in the ITU
standardization process, it is under no obligation to respond.
At what point in time should disclosure occur?
The Patent Policy encourages early disclosure, stating that disclosure should be made ‘from the outset’,
and the related guidelines offer more extensive guidance in this respect. If not from the outset, given
that the first draft of a standard might be too vague or substantially different from the final standard, the
Patent Policy’s wording implies that disclosure should be made as early as possible during a standard’s
development. Disclosures made early in the process provide study groups with key information that
could affect the future course of a standard’s development, also giving ITU time to determine whether
holders of potential SEPs are willing to grant licences to their patented technology should their patents
be found essential to an approved standard.
Disclosure after approval of a standard
If, after a standard is approved, a participant becomes aware that it holds SEPs or that it has filed patent
applications which could result in SEPs, that participant should still make a disclosure. Disclosures
should be made whenever a party participating in the standardization process becomes aware that it
holds SEPs or potential SEPs.
How disclosures are made
A participant must use a pre-defined declaration form to make a disclosure, sent to the Director of TSB
or BR (see Figure 15-2). This form helps to populate patent information databases with clear, consistent
information. Attention should be given to supplying contact information that will remain valid over
time. In particular, multinational companies are especially encouraged to provide the same contact
information on every declaration form they submit.
Chairmen of study groups and their subordinate groups, or other expert groups of ITU-T and ITU-R, will
ask during meetings whether participants have knowledge of any potential SEPs. Responses will be
recorded in the meeting’s report, but disclosures must also be made officially, using the declaration
form.
Understanding patents, competition and standardization in an interconnected world
Partstandardization
I – Standards and
standards
development
Part IV – A closer look at ITU’s
activities
and its
patent policy
87
Figure 15-2 – Extract from the Patent Statement and Licensing Declaration Form,
in which a submitter selects licensing options
Licensing declaration:
The Patent Holder believes that it holds granted and/or pending applications for Patents, the use of which would be
required to implement the above document and hereby declares, in accordance with the Common Patent Policy for
ITU-T/ITU-R/ISO/IEC, that (check one box only):
1.
The Patent Holder is prepared to grant a Free of Charge license to an unrestricted number of
applicants on a worldwide, non-discriminatory basis and under other reasonable terms and conditions to
make, use, and sell implementations of the above document.
Negotiations are left to the parties concerned and are performed outside the ITU-T, ITU-R, ISO or IEC.
Also mark here __ if the Patent Holder’s willingness to license is conditioned on Reciprocity for the above
document.
Also mark here __ if the Patent Holder reserves the right to license on reasonable terms and conditions (but not Free of Charge) to applicants who are only willing to license their Patent, whose use
would be required to implement the above document, on reasonable terms and conditions (but not
Free of Charge).
2.
The Patent Holder is prepared to grant a license to an unrestricted number of applicants on a
worldwide, non-discriminatory basis and on reasonable terms and conditions to make, use and sell implementations of the above document.
Negotiations are left to the parties concerned and are performed outside the ITU-T, ITU-R, ISO, or IEC.
Also mark here __ if the Patent Holder’s willingness to license is conditioned on Reciprocity for the above
document.
3.
The Patent Holder is unwilling to grant licenses in accordance with provisions of either 1 or 2
above.
In this case, the following information must be provided to ITU, and is strongly desired by ISO and IEC,
as part of this declaration:
–– granted patent number or patent application number (if pending);
–– an indication of which portions of the above document are affected;
–– a description of the Patents covering the above document.
Free of Charge: The words “Free of Charge” do not mean that the Patent Holder is waiving all of its rights with
respect to the Patent. Rather, “Free of Charge” refers to the issue of monetary compensation; i.e., that the Patent
Holder will not seek any monetary compensation as part of the licensing arrangement (whether such compensation
is called a royalty, a one-time licensing fee, etc.). However, while the Patent Holder in this situation is committing
to not charging any monetary amount, the Patent Holder is still entitled to require that the implementer of the same
above document sign a license agreement that contains other reasonable terms and conditions such as those relating
to governing law, field of use, warranties, etc.
Reciprocity: The word “Reciprocity” means that the Patent Holder shall only be required to license any prospective
licensee if such prospective licensee will commit to license its Patent(s) for implementation of the same above document Free of Charge or under reasonable terms and conditions.
Patent: The word “Patent” means those claims contained in and identified by patents, utility models and other
similar statutory rights based on inventions (including applications for any of these) solely to the extent that any such
claims are essential to the implementation of the same above document. Essential patents are patents that would be required to implement a specific Recommendation | Deliverable.
Understanding patents, competition and standardization in an interconnected world
88
Part IV
I ––Standards
A closer look
and at
standards
ITU’s standardization
developmentactivities and its patent policy
15.4 Licensing commitments for declared SEPs
The Patent Policy seeks commitments from owners of disclosed SEPs that they will license their SEPs
to standards implementers on RAND or RF terms.
Disclosures and licensing commitments are made using the same Declaration Form. Participants
and members are obligated to submit this form.115 Owners of disclosed SEPs also have the freedom
to indicate that they are unwilling to license their SEPs on the sought RAND or RF terms. Such a
decision has significant impact on the development of a standard – making it necessary to remove
features demanding the use of the particular patented technology, or sometimes to withdraw work on
a standard entirely – but one of the chief purposes of a patent policy is to make such positions known
early, allowing time for appropriate measures to be taken in response. Fortunately, refusals to submit
licensing commitments are rare, as can be seen in Figure 15-3.
Figure 15-3 – Type of received licensing commitments, by year
Declared licensing options since 2000
Number
of
declarations
150
140
130
RAND
120
RF
110
Refuse License
100
90
80
70
60
50
40
30
20
10
0
115
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120 2013 Year of declaration
Third parties, however, are not obligated to submit such a form, even if ITU requests them to do so: SDO policy is simply not
binding on such third parties.
Understanding patents, competition and standardization in an interconnected world
Partstandardization
I – Standards and
standards
development
Part IV – A closer look at ITU’s
activities
and its
patent policy
89
Commitment to license on royalty free (RF) terms
The first selection box in Figure 15-2 provides the exact text of an organization’s commitment to license
their potential SEPs on RF terms (the document refers to RF as ‘free of charge’, which has the same
meaning). The text notes that, despite the commitment to free-of-charge licensing, SEP licences can
be granted ‘under other reasonable terms and conditions’. The Declaration Form includes a definition
of the term ‘free of charge’, which explains that the patent holder does not waive all rights with respect
to its patent, and is still entitled to require that standards implementers ‘sign a licence agreement that
contains other reasonable terms and conditions such as those relating to governing law, field of use,
reciprocity, warranties, etc.’ However, owners of potential SEPs are not permitted to stipulate other
terms and conditions not compatible with RAND. This approach is also known as RAND-RF or RANDzero.
The SEP holder has the opportunity to use a checkmark to indicate that their willingness to license
implementers is conditional upon ‘reciprocity’ in terms of others’ granting licences to SEPs relevant to
the specified standard. This is intended to prevent a standards implementer from obtaining a licence
from the SEP holder while in parallel refusing to grant licences to their own SEPs in relation to the same
standard. Having a licence conditioned on reciprocity means that the SEP holder will only be required
to license a standards implementer if that implementer agrees to license its own SEPs for the same
standard on RF or RAND terms. When making a general commitment to license implementers on RF
terms, the SEP owner also has the opportunity to use a checkmark to indicate that it will instead offer a
RAND licence (not ‘free of charge’) to any implementers only willing to offer a reciprocal royalty-bearing
RAND licence.
Commitment to license on RAND terms
The second selection box in Figure 15-2 provides the exact text of an organization’s commitment to
license their potential SEPs on RAND terms. In contrast to RF commitments, SEP owners making RAND
commitments reserve the freedom to require royalty-bearing licences (that is, demanding monetary
compensation from licensees).
Just as with RF commitments, the SEP holder has the opportunity to use a checkmark to indicate that
its willingness to license implementers is conditional upon ‘reciprocity’ in terms of others’ granting
licences to SEPs relevant to the specified standard.
No willingness to license
The last selection box in Figure 15-2 provides the exact text of an organization’s refusal to commit
to licensing their potential SEPs on RF or RAND terms. Regardless of whether the patent owner is
unwilling to license SEPs or only willing to license SEPs on terms other than RF or RAND, the availability
of licences as desired by ITU is not achieved. In such cases, ITU requires116 that the patent holder
provide the following information as part of the Declaration Form:
–– Granted patent number or patent application number (if pending)
–– An indication of which portions of the standard are affected
–– A description of the patents essential to the standard.
116
Again, strictly speaking, ITU cannot require such a thing from third parties not bound by its policies. However, if a third party
believed to own SEPs is not willing to submit this form, ITU becomes aware of the possible lack of licences on the desired terms
and can take appropriate steps in response.
Understanding patents, competition and standardization in an interconnected world
90
Part IV
I ––Standards
A closer look
and at
standards
ITU’s standardization
developmentactivities and its patent policy
In addition, ITU requires that the patent holder fill out the table on the third page of the Declaration
Form to identify the titles of the relevant patents or patent applications as well as their status (granted
or pending), country and number. ITU requires this additional information in order to inform the relevant
study groups and their subordinate groups, or other expert groups of ITU-T and ITU-R, to ensure that
appropriate action can be taken in response. Such action will generally include a review of the affected
Recommendation or its draft to remove the cause of the refusal to license potential SEPs, or to examine
and clarify the technical considerations causing the refusal.
A patent holder may not modify the Declaration Form
Patent holders submitting a Declaration Form are not permitted to include additional provisions,
conditions or modifications over what is provided for by the options on the Declaration Form. The
patent holder must check a box corresponding to one of the three options offered by the Declaration
Form, and may check sub-options, if applicable.
A patent holder may submit multiple Declaration Forms
A patent holder may submit multiple Declaration Forms for the same Recommendation if:
–– The patent holder wishes to identify several patents and would like them classified according to
different options on the Declaration Form; or,
–– The patent holder wishes to classify separate aspects of a complex patent according to different
options on the Declaration Form.
A Declaration Form, once submitted, is irrevocable
The licensing commitment embodied by the Declaration Form remains in force unless it is superseded
by another Declaration Form containing more favourable licensing terms and conditions from a
licensee’s perspective. In other words, a patent holder can:
–– Change its licensing commitment from option 3 to option 1 or 2;
–– Change its licensing commitment from option 2 to option 1; or,
–– Un-check one or more sub-options contained within either option 1 or 2.
However, obvious errors such as typographical mistakes in a standard or patent reference number can
be corrected at any time.
The General Patent Statement and Licensing Declaration Form
In addition to the ‘Patent Statement and Licensing Declaration’ form, ITU also has a ‘General Patent
Statement and Licensing Declaration’ form (‘General Form’). The General Form gives patent holders
the ability to make a general licensing declaration in relation to patent-protected material contained
within any of their contributions to ITU standardization work. By submitting a General Form, patent
holders declare their willingness to license any eventual SEPs arising as a result of their contributions’
proposals being reflected in Recommendations. The General Form includes two options similar to the
first two options on the Declaration Form, but differs from the Declaration Form in that it applies to any
Recommendation rather than one specifically.
Understanding patents, competition and standardization in an interconnected world
Partstandardization
I – Standards and
standards
development
Part IV – A closer look at ITU’s
activities
and its
patent policy
91
The General Form is not a replacement for the Declaration Form in the case of a specific Recommendation.
A patent holder having already submitted a General Form should also submit a Declaration Form for
potential SEPs relevant to a specific Recommendation.
It is also important to note that the General Form does not imply SEP disclosure. Companies can
submit this form even if they do not believe that they own potential SEPs. It differs from the Declaration
Form in this respect, which does imply disclosure of what is believed to be a potential SEP.
Like the Declaration Form, once a General Form has been submitted, it becomes irrevocable. A General
Form remains in force unless it is superseded by another General Form containing more favourable
licensing terms and conditions from a licensee’s perspective (such as a move from RAND to RF, for
instance).
Transfers and assignment of declared SEPs
A patent holder participating in ITU standardization work that assigns or transfers ownership or control
of declared SEPs is required to make reasonable efforts to notify the assignee or transferee of related
licensing commitments. In addition, if that patent holder identified specific patents to ITU, they must
have the assignee or transferee agree to be bound by the same licensing commitments for the same
patent(s). If that patent holder did not identify specific patents to ITU, they must make reasonable
efforts to have the assignee or transferee agree to be bound by the same licensing commitment
for the same patent(s); however the patent holder is not required to conduct a patent search. By
complying with these requirements, the patent holder discharges its obligations in relation to its
licensing commitments after the transfer or assignment of the patents.
ITU’s Patent Information database
ITU maintains a publicly available ‘Patent Information’ database composed of information communicated
to ITU by means of Declaration Forms and General Forms submitted by patent holders. Cover sheets of
all new and revised ITU-T and ITU-R Recommendations, where appropriate, urge users to consult the
ITU Patent Information database.
ITU does not guarantee the accuracy or completeness of the Patent Information database, as it only
reflects information communicated to ITU. Inaccuracy or incompleteness could occur for several
reasons:
–– Declaration Forms might relate to patents not found to be essential
–– Participants might not be aware that they own SEPs
–– SEP holders might not be participating in the ITU standardization process.
The Patent Information database is thus best viewed as a means of raising flags that alert study group
participants and standards implementers to the possibility that certain patent holders may own SEPs
for which they have made licensing commitments. In the interests of maintaining an up-to-date ITU
Patent Information database, patent holders should inform ITU of any changes or corrections to any
previously submitted Declaration Forms or General Forms, especially with regard to the contact details
provided.
ITU is not involved in evaluating a patent’s relevance, nor is it involved in evaluating a patent’s essentiality
in relation to any Recommendations.
Understanding patents, competition and standardization in an interconnected world
92
Part IV – A closer look at ITU’s standardization activities and its patent policy
Conduct at meetings
Study groups and their subordinate groups, or other expert groups of ITU-T and ITU-R, will consider
information relating to potential SEPs as part of their standardization efforts. However, these groups are
not permitted to take any position regarding the essentiality, scope, validity or specific licensing terms
of disclosed patents. The details of the arrangements arising from SEPs, such as specific licensing
terms or royalties, are the responsibility of the parties involved.
ITU will not interfere with negotiations nor settle disputes
ITU will not interfere with licensing negotiations between SEP holders and standards implementers,
nor will it engage in settling any disputes between such parties. All licensing negotiations and dispute
resolutions are the responsibility of the parties involved.
15.5 Recent steps aimed at improving the Common Patent Policy
The TSB Director’s Ad Hoc Group on IPR plays an advisory role to the Director of TSB on questions of
relevance to patents’ inclusion in standards, aiming to protect the standardization ecosystem, clarify
its patent policy and limit abuse of the system.
The Ad Hoc Group was formed in the early 1990s, and has served ITU’s membership well for more
than 20 years, assessing information drawn from the collective input of industry participants to submit
insightful feedback and numerous proposals leading to the development and amendment of ITU’s
patent policy and related guidelines.
ITU organized a high-level Patent Roundtable in October 2012117 – assembling industry players,
regulators, patent offices, government representatives and experts in intellectual property law – to
examine the effectiveness of RAND-based patent policies and to explore possible solutions to the
challenges posed by the interplay of the standards and IPR systems.
The Patent Roundtable came in response to concerns raised by competition authorities, particularly in
the US and Europe, regarding the increase in standards-related patent litigation in the ICT industry as
well as the possible use of SEPs to exclude competitors from a market.
Regulators had also expressed concerns regarding the possible use of SEPs to pressure standards
implementers into accepting higher royalties in bilateral licensing negotiations – also referred to as
patent hold-ups – an act which undermines the aims of RAND-based patent policies to the disadvantage
of standards implementers, hurting consumers, who ultimately shoulder these higher costs.
As a result of the Patent Roundtable, the TSB Director requested the TSB Director’s Ad Hoc Group
on IPR to begin an accelerated series of meetings in an effort to produce a recommendation aimed
at providing high-level principles clarifying the meaning of ‘reasonable’ in the RAND context and the
conditions under which companies that have made RAND commitments should be allowed to seek
injunctive relief.
117
ITU Patent Roundtable, Geneva, Switzerland, 10 October 2012: http://www.itu.int/en/ITU-T/Workshops-and-Seminars/patent/Pages/
default.aspx.
Understanding patents, competition and standardization in an interconnected world
Questions for consideration
93
Questions for consideration
Part i:
1. What would you consider the most important benefits of standardization? What would be the
most dangerous risks from over-standardization in a specific sector?
2. What would you consider the most important elements of ‘openness’ in industry standards?
3. In your opinion, which types of standards are the primary drivers of innovation?
4. What should be the criteria for evaluating the ‘success’ of a standard?
Part II:
1. Why is the relationship between patents and standards the subject of debate?
2. Why do companies contribute their technology to SDOs?
3. How do SDOs strike a balance between the interests of patent holders and implementers of the
standard?
4. Name and explain three specific issues arising from the incorporation of patents in standards.
Part III:
1. What are the main purposes of the IPR system?
2. What are the main purposes of competition law?
3. How are the IPR system and competition law relevant to the ICT standardization ecosystem?
4. What are the main challenges faced by the IPR system and competition law in relation to the aims
of ICT standardization?
Part iv:
1. What are the key elements of the ITU-T/ITU-R/ISO/IEC Common Patent Policy?
2. What are the principal benefits of this Patent Policy? What are the risks attached to its provisions?
3. Does ITU take part in licensing discussions between SEP holders and implementers? Why?
Understanding patents, competition and standardization in an interconnected world
International Telecommunication Union
Standardization Bureau
Place des Nations
CH-1211 Geneva 20
Switzerland
www.itu.int
ISBN: 978-92-61-14921-5
9 789261 149215
Printed in Switzerland
Geneva, 2014